The Impact of Managerial Discretion on Firm Performance

Theoretical arguments from two distinct literatures are integrated to develop a model which attempts to shed further light on the determinants of performance in multinational corporations. It is suggested that the ambiguity of results in prior investigations could be attributed to variations in managerial discretion. Building on the concept of managerial discretion, it is hypothesized that in high discretion settings, organizational and leadership factors will be associated with performance. In contrast, in low discretion settings, where environmental factors predominate, managers have limited latitude; therefore, the impact of these factors on performance will be limited. These hypotheses are tested in two different industry settings. The results largely confirm the theoretical contentions.