Top executives’ discretion and organizational performance: Analysis of quasi-governmental organizations in Korean government

Abstract

This study has examined the impacts of top executives’ discretion on organizational performance in public organizations. We analyzed longitudinally collected data from quasi-governmental organizations in Korea. The results show that top executives’ managerial discretion has an inverted U-shape relationship with the overall performance of organizations. The marginal effect of top executives’ discretion on organizational performance was negative. This suggests that the benefits from top executives’ discretion decrease as the level of managerial discretion increases. The greater discretion of top executives in project management was more likely to yield desirable outcomes for organizations. Top executives’ discretion did not significantly affect customer satisfaction and transparency of organizations. Points for practitioners This study has empirically shown that there exists an inverted U-shape relationship between managerial discretion and organizational performance. It is necessary to let public managers exercise their discretion in managing their businesses given that flexibility and innovativeness in decision making serve key roles in effective organizational management in highly turbulent organizational contexts. It will also be important to properly monitor public managers’ discretionary authority to avoid unintended negative consequences of discretion.