He-Boong Kwon, Paul Hong, James Jungbae Roh

In the stiff global competition, it is critical for small and medium size enterprises (SMEs) to form and grow in a network. The nature of participation in a network for SMEs is somewhat different from large and dominant firms. SMEs may become a part of the network under the umbrella of a big focal company or build a cluster of inter-dependent network among SMEs. This is possible in the environment of strategic alliances.

Sustaining an effective network requires effective governance mechanisms. Governance has been an important topic from the perspective of corporate strategy and finance, however, there has been a limited attempt to understand governance from the perspective of SMEs in the context of a network development and sustenance.

This paper explores the importance of governance in SMEs, and examines differences between traditional sense of governance and network centered governance by explaining implementation of effective governance in SMEs. Literature review is conducted to define essential features of effective governance, present a research model that provide a basis of identifying best practices of governance in SMEs. Case examples illustrate the research model. Lessons from this study are discussed for future research and managerial implications.