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

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.