Perceived Managerial Discretion: A Study Of Cause And Effect

The notion that managers encounter differing levels of discretion across industries and organizations is becoming central to discussions of strategy formulation and implementation. However, discretion can be exercised or created only to the extent it is perceived, and theories of cognition and decision making suggest that managers’ perceptions of discretion may vary significantly. Despite the importance of perceptions to Hambrick and Finkelstein’s (1987) theoretical model of managerial discretion, no empirical tests examining perceived discretion have been published to date. Drawing on theories of issue interpretation and impression management, we find that managers differ systematically in the amount of discretion they perceive. Specifically, we find support for the predicted relationship between locus of control, a stable personality difference, and perceptions of managerial discretion. We also find that perceived discretion predicts managerial power, but only in situations in which the manager actually has little discretion. The dynamic model presented and tested here suggests that managers, in part through impression management activities and their ability to attend to critical contingencies, may both increase their power and enlarge their latitude for action. Implications for strategy formulation and implementation are discussed. © 1997 by John Wiley & Sons, Ltd.