Managerial Discretion and Strategic Change

Prior research has associated low managerial discretion with a low organizational capacity for adaptation. The role of organizational members outside the top management team (TMT) in influencing organizational outcomes has, however, been overlooked in research on the effects of managerial discretion. Based on a case study of a technology company, I show that the TMT might relinquish a significant part of its discretionary power to employees outside upper management to enable them to contribute to the organization’s adaptive capacity. Specifically, I develop a conceptual model that portrays strategic renewal as an outcome of the interplay between tight and loose coupling or, in other words, a TMT that maintains a system of tightly coupled complementary activity choices and other organizational members that are enabled to initiate organizational adaptations. These results lead me to reassess the managerial discretion construct and to suggest a multi-level conceptualization that considers managerial discretion in the context of the distribution of discretion across the organizational hierarchy.