Managerial orientations and organizational outcomes: The moderating roles of managerial discretion and power

Scholars of strategic management generally recognize the importance of top-level managers to a firm's strategy. However, the nature of managerial influence in strategic decision-making has seldom been explored. Although some progress has been made in recent investigations linking managers to strategy (e.g. Gupta and Govindarajan, 1984), many unanswered questions remain. For example, while the concept of the dominant coalition has been with us for almost 25 years, knowledge of its role in strategy-making has not been significantly advanced. To better understand the role of top management in strategy formation, we need to understand how managerial preferences and biases get translated into organizational outcomes. This research seeks to clarify such a relationship by (1) focusing on the role of managerial discretion in facilitating or inhibiting managerial influence in strategy formation; and (2) examining how the distribution of power in top management teams moderates the linkage between managerial orientation and organizational outcome.;We develop a set of propositions linking functional orientations, willingness to take risk, commitment to the status quo, and managerial boldness to such outcomes as strategic choices, financial leverage, strategic persistence and strategic and performance deviance. The propositions are tested in a sample of top management teams in 102 firms over five years. Among the key findings of the study are that (1) managerial commitment to the status quo is positively related to strategic persistence; (2) managerial boldness is positively related to strategic and performance deviance; (3) these results are stronger in high discretion contexts than in low discretion contexts; and (4) consideration of managerial power strengthens the relationships found.;Extending upper echelons theory (Hambrick and Mason, 1984), we argue that managerial discretion and power are critical moderating forces that affect the relationship between managerial orientations and organizational outcomes. Specifically, we argue that the manager-strategy link will be stronger in high discretion contexts than in low discretion contexts and that the orientations of the most powerful managers are more likely to get translated into organizational outcomes.