Differences in managerial discretion across countries: How nation-level institutions affect the degree to which ceos matter

Craig Crossland, Donald C. Hambrick

Research output: Contribution to journalArticle

238 Scopus citations

Abstract

The concept of managerial discretion provides a theoretical fulcrum for resolving the debate about whether chief executive officers (CEOs) have much influence over company outcomes. In this paper, we operationalize and further develop the construct of managerial discretion at the national level. In an empirical examination of 15 countries, we find that certain informal and formal national institutions-individualism, tolerance of uncertainty, cultural looseness, dispersed firm ownership, a common-law legal origin, and employer flexibility-are associated with the degree of managerial discretion available to CEOs of public firms in a country. In turn, we show that country-level managerial discretion is associated with how much impact CEOs have on the performance of their firms. We also find that discretion mediates the relationship between national institutions and CEO effects on firm performance. Finally, we discuss two inductively derived institutional themes: autonomy orientation and risk orientation.

Original languageEnglish (US)
Pages (from-to)797-819
Number of pages23
JournalStrategic Management Journal
Volume32
Issue number8
DOIs
StatePublished - Aug 1 2011

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

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