The Influences of Perceived Managerial Discretion and Risk-Taking Behavior on Government Organizational Performance

Danis Hidayat Sumadilaga, Budi W. Soetjipto, Sari Wahyuni and Setyo Hari Wijanto

International Journal of Public Administration, 2017, vol. 40, issue 13, 1075-1084

Abstract: Purpose: This study investigates pertinent factors in perceived managerial discretion (PMD) in association with risk-taking behavior (RTB) and organizational performance within government organizations. Design/methodology/approach: This study used a mix of qualitative methods—using focus group discussions (FGDs) to select key variables affecting PMD and to validate the research findings—and quantitative methods—using structural equation modeling (SEM) to test eight hypotheses developed from FGDs and from a literature review. Out of 340 questionnaires sent out to potential participants, 260 were returned and deemed valid for SEM analysis, reflecting a satisfactory response rate of 76%. Findings: A total of six factors affecting PMD were identified: quasi-legal constraint (QLC), powerful outside forces (POFs), inertial forces (IFs), powerful inside forces (PIFs), power base (PB), and political acumen (PA). The SEM analysis indicated that QLC, PIF, PB, and PA enhance PMD, while IF tends to inhibit PMD. Stronger PMD was associated with weaker RTB on the part of government-official decision makers, while greater RTB was associated with more positive organizational outcomes. These findings are partially consistent with prior findings, with some notable contradictions. Research implications/limitations: The primary limitation of this study was its limited external validity, as these findings can only be extended to organizations with similar characteristics of those of the government institution used as the case study. These findings must be used with care for different types of public organizations. Practical implications: These findings support taking the following steps: (1) review and remove equivocal regulations that could restrain PMD, (2) streamline bureaucracy, (3) establish regulations that allow more space for innovation and discretion, (4) delineate the tasks and responsibilities of decision makers, and (5) discourage abrupt policy changes, promoting proper scrutiny and notice.

Date: 2017
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DOI: 10.1080/01900692.2016.1242613

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