Managerial discretion

Managerial discretion has been defined as the latitude of action that is available to managers. Hambrick and Finkelstein (1987) proposed that discretion would be affected by factors at the individual, firm, and industry levels. While the construct is widely attributed to Hambrick and Finkelstein’s (1987) book chapter, the concept had been described previously. Pfeffer and Salancik (1978: 244-247), for example, discussed determinism, constraint, and superior-subordinate relations as determinants of individual discretion. Similarly, Mintzberg (1983) discussed discretion in the context of organizational power

Hambrick, D. C. and Finkelstein, S. (1987). Managerial discretion - A bridge between polar views of organizational outcomes. Research in Organizational Behavior, 9, 369-406.

Pfeffer, J., and Salancik, G. R. (1978) The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row.

Mintzberg, H. (1983). Power In and Around Organizations. Englewood Cliffs, NJ: Prentice Hall.

Studies typically focus on the industry level, and more recent research has also conceptualized discretion as a country-level construct. Most articles have used archival data sources, while Carpenter and Golden (1997) developed a survey instrument to measure perceived discretion. A small number of studies have measured discretion at multiple levels (Boyd & Salamin, 2001; Magnum & St. Onge, 1997). Many of the measures of discretion overlap with indicators of Dess and Beard’s (1984) environmental characteristics. Boyd and Gove (2006) provide a content analysis of the various approaches used to measure discretion. Boyd, B.K., & Gove, S. (2006). Managerial constraint: The intersection between discretion and organizational task environment. In, D. Ketchen & D. Bergh (Eds.) Research Methodology in Strategy and Management, Volume 3. New York: Elsevier 57-95. Dess, G. G. and Beard, D. W. (1984) Dimensions of organizational task environments, Administrative Science Quarterly, 29: 52-73.

Studies using individual-level measures

Aragon-Correa, J. A., Matias-Reche, F., and Senise-Barrio, M. E. (2004). Managerial discretion and corporate commitment to the natural environment. Journal of Business Research, 57(9), 964-975.

Boyd, B. K., and Salamin, A. (2001). Strategic reward systems: A contingency model of pay system design. Strategic Management Journal, 22(8), 777-792.

Carpenter, M. A., and Golden, B. R. (1997). Perceived managerial discretion: A study of cause and effect. Strategic Management Journal, 18(3), 187-206.

Studies using firm-level measures

Boyd, B. K., and Salamin, A. (2001). Strategic reward systems: A contingency model of pay system design. Strategic Management Journal, 22(8), 777-792.

Finkelstein, S., and Boyd, B. K. (1998). How much does the CEO matter? The role of managerial discretion in the setting of CEO compensation. Academy of Management Journal, 41(2), 179-199.

Magnan, M. L., and St. Onge, S. (1997). Bank performance and executive compensation: A managerial discretion perspective. Strategic Management Journal, 18(7), 573-581.

Rajagopalan, N. (1997). Strategic orientations, incentive plan adoptions, and firm performance: Evidence from electric utility firms. Strategic Management Journal, 18(10), 761-785. Rajagopalan, N., and Finkelstein, S. (1992). Effects of strategic orientation and environmental-change on senior management reward systems. Strategic Management Journal, 13, 127-141. Studies using industry-level measures

Abrahamson, E., and Hambrick, D. C. (1997). Attentional homogeneity in industries: The effect of discretion. Journal of Organizational Behavior, 18, 513-532.

Magnan, M. L., and St. Onge, S. (1997). Bank performance and executive compensation: A managerial discretion perspective. Strategic Management Journal, 18(7), 573-581.

Datta, D. K., and Rajagopalan, N. (1998). Industry structure and CEO characteristics: An empirical study of succession events. Strategic Management Journal, 19(9), 833-852. Datta, D. K., Guthrie, J. P., and Wright, P. M. (2005). Human resource management and labor productivity: Does industry matter? Academy of Management Journal, 48(1), 135-145. Datta, D. K., Rajagopalan, N., and Zhang, Y. (2003). New CEO openness to change and strategic persistence: The moderating role of industry characteristics. British Journal of Management, 14(2), 101-114. Finkelstein, S., and Hambrick, D. C. (1990). Top-management-team tenure and organizational outcomes - the moderating role of managerial discretion. Administrative Science Quarterly, 35(3), 484-503. Hambrick, D. C. and Finkelstein, S. (1987). Managerial discretion - A bridge between polar views of organizational outcomes. Research in Organizational Behavior, 9, 369-406. Hambrick, D. C., and Abrahamson, E. (1995). Assessing managerial discretion across industries - a multimethod approach. Academy of Management Journal, 38(5), 1427-1441. Hambrick, D. C., Geletkanycz, M. A., and Fredrickson, J. W. (1993). Top executive commitment to the status-quo - Some tests of its determinants. Strategic Management Journal, 14(6), 401-418. Studies using country-level measures Crossland, C. & Hambrick, D.C. 2011. Differences in managerial discretion across countries: How nation-level institutions affect the degree to which CEOs matter. In press at Strategic Management Journal. Crossland, C. & Hambrick, D.C. 2007. How national systems differ in their constraints on corporate executives: A study of CEO effects in three countries. Strategic Management Journal, 28: 767-789.