In the driving seat: Executive’s perceived control over environment

Abstract

This study investigates executives’ perceived control over their environment. Drawing on managerial cognition and upper echelons theory, we test a model that specifies perceived control over environment as made up of organizational routines (i.e. information processing capability and decision comprehensiveness) and executive understanding of performance (i.e. organizational effectiveness and organizational slack). Findings from a scenario study of 46 executives in 14 pharmaceutical firms show perceived control over the internal environment can be explained by information processing capability, and the interactions between organizational routines and resources. Perceived control over the external task environment can be explained by information processing. This difference accounts for the extent to which executives perceive that they can control their environment, adding to the more traditional view focused on the requirements for a strategic fit to environment. JEL Classification: M10, M12, L20