Leadership and Internal Control Modelling: A Qualitative Analysis of Conceptual Model & External Validity Practiced by SME Directors

Olga V. Missioura
(Nyenrode Business University, The Netherlands)

Abstract: This article outlines the details of an empirical study into the perceptions of Small to Medium-sized Enterprises (SME) Directors regarding the concepts in conceptual model and the interpretation of these concepts. The results of the testing of external validity of the conceptual model primarily indicate that in selecting the determinants for effective and efficient changes in behaviour, the SME directors specifically chose to utilise two concepts of leading. These two concepts are characteristics of a businessperson, namely leadership style and commitment. The scientists primarily chose the combination of leadership style and communication. The study is based on a pre-test conducted with five scientists (5) and testing conducted with nineteen SME Directors by way of in-depth interviews. This study supports the external validity of the conceptual model applied. In the opinions of the scientists formed the concepts of leading the independent determinants for the Internal Control (IC), according to the COSO ICIF (1992), through the behavioural beliefs. However the SME directors recognise the direct causal relationship between their concepts of leading and IC components. The choices of IC components by the SME directors were Risk Assessment, Control Activities and Information & Communication Principles. The selected IC components can affect the efficiency and effectiveness of the enterprise. The scientists choose two aspects of the COSO ICIF (1992) concepts, i.e., RA/Risk Assessment and ICP/Information & Communication Principles. These two COSO 1992 components can affect, according the scientists, the efficiency and effectiveness of business activities. On the basis of the choices of SME directors and scientists and the visual display of the most recent concepts, we can see by which manner and which concepts from the conceptual model, work in a conceptual model. This study can be described as an exploratory study, consisting of qualitative in-depth interviews.

Key words: external reliability; leadership in the SME sector; effective leadership style; COSO ICIF 1992

JEL codes: G, G02