Permission meets pressure: institutional risk, CEO self-monitoring and extreme strategic change

Abstract

Purpose Explain why some multinationals pursue extreme strategic shifts whereas others opt for incremental change by testing how national institutions and CEO behavior interact. Design/methodology/approach We merge institutional-discretion theory with upper-echelons logic in a moderated-mediation model. Our sample has 1,422 firm-year observations (2000–2017) from US-based Fortune Global 500 firms operating abroad. Findings We find that institutional risk (societal tolerance for deviant action) heightens CEO self-monitoring, which in turn dampens the extremeness of strategic change. This indirect, risk-induced tempering effect is strongest in low-autonomy (tight) cultures where normative sanctions are salient and weakest in high-autonomy settings that relax conformity pressures. Research limitations/implications Future studies should treat managerial discretion as a cross-level paradox rather than a unidirectional catalyst. We encourage tests of the permission–pressure mechanism using other traits (e.g. political skill) and in contrasting institutional logics. Practical implications Boards and policy-makers should acknowledge that the same institutional features that grant executives more latitude can also make high self-monitors cautious. Aligning governance mechanisms with desired change magnitude requires tailoring incentives for high self-monitoring leaders or widening board expertise in tight cultures. Originality/value We introduce CEO self-monitoring as a conduit linking national discretion to change extremeness, enriching managerial-discretion theory. The study uncovers a novel permission–pressure paradox at the intersection of institutions and executive behavior.