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Over the years Upper Echelons research confirmed there are contingencies which are capable of molding the relation between top management team and firm outcomes, thus introducing the role of context. Those studies effectively demonstrate that managerial effects, as the ones linked to demographic or psychographic variables, are dependent on contextual variables which can be grouped into three macro areas:

environmental, organizational and leadership contingencies (Carpenter, Geletkanycz et al. 2004).

From environmental circumstances, national culture is a very powerful context (Carpenter, Geletkanycz et al. 2004). Amongst the first to document this contingency was Geletkanycz (1997), who built on previous studies pointing tenure was a good predictor of a firm’s commitment to status quo strategies and accounted for managers’

cultural backgrounds. Once those were introduced as control variables the said relation no longer could be established as tenure dependent alone, proving national culture’s moderating effect on said outcome. Other studied environmental contingencies include industry change rate and stability. Firms in different industries face unique external environmental conditions as well as internal (e.g., technological) contingencies.

Because of this, different functions must be emphasized to achieve organizational success. Lawrence, Lorsch et al. (1967) discovered that marketing had more influence than production in both food processing firms and container manufacturing firms.

However, these relationships were not found to exist for firms in the plastics industry.

These researchers therefore concluded that the relative importance of functional areas varies by industry type. Porter (1980) notes that an industry's structure strongly influences the kinds of strategies available to the firm and additionally that, since external forces affect all firms within a particular industry, organizational effectiveness may be a product of the firm's ability to cope with these pervasive forces, proving industry types are not homogeneous. Tied to industry type discretion (regulation level, growth rate, etc.), there appears to be general consensus that environmental characteristics, particularly those that represent uncertainty for the firm and its managers, will have implications for the Upper Echelons model (Carpenter, Geletkanycz et al. 2004). Research also suggests that the internal organizational context

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also creates a host of relevant contingencies, thus it should be accounted in the model as well. For instance, a firm’s level of internationalization or governance arrangement is capable of affecting demographic effects on firm outcome.³ An organization's financial resources and its work force are conceptually distinct aspects of size. For example, large organizations have more complex and diverse facilities, namely financial slack which allows room for failure or time consuming methods, improved research capabilities, product development experience, broader marketing skills, etc. that aid the adoption of a large number of innovations (Damanpour 1992). Into the international selection method this could translate in larger firms being able to apply more onerous and time-resource consuming processes. Also the effectiveness of leadership has long been argued to be dependent on organizational size (Hambrick and Mason 1984). Nahavandi and Malekzadeh (1993) propose that leaders’ impact decreases in larger organizations, and inversely, that in smaller organizations, leadership has a stronger impact than in larger ones. The complexity of communication increases in larger organizations and the difficulty of members’ ability to express their opinions may diminish the effect of the leader’s impact (Bantel and Jackson 1989). Regarding TMT group size, it is likely to influence measures of demographic heterogeneity, since large groups have more potential for dissimilarity. In a small group, the addition of one person can increase team heterogeneity substantially (Bantel & Jackson, 1989). Regarding organizational age, older organizations tend to exhibit higher mean performance, greater reliability in their performance and higher levels of inertia in their behaviors (Levinthal 1991). Levitt and March (1988) noted that as an organization gains experience and proficiency in current activities, procedures or technologies, it becomes less likely to experiment with alternatives. So, there is a greater learning inertia which increases with organizational age. Both firm size and age are correlated to the adoption of planned versus emergent strategy deployment. As Slevin and Covin (1997) noted, there is a significant correlation between the emergent-to-planned strategy scale and firm age, implying that larger and older firms are more likely than smaller and younger firms to have planned strategies. Also Van Hoorn (1979) found that small and medium enterprises, when compared with multinational enterprises, typically have poorly developed

3 Reference to works studying the said topic can be found in Carpenter, M. A., et al. (2004). "Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition." Journal of management 30(6): 749-778.

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administrative policies and procedures, and a tendency towards making opportunistic rather than systematic strategic decisions. Thus, when evaluating for consistency in international market selection these variables may also influence the manager’s decision process and must be accounted for.

Due to these contextual variables, Hambrick and Finkelstein (1987) proposed refinements to Upper Echelons’ initial model by introducing the moderator variable of managerial discretion. Managerial discretion was suggested somewhat as a common denominator consequence of most of the contextual moderating factors suggested above which indicates to which degree managers are capable of influencing firm outcomes.

Discretion, in this research context, exists when there are low boundaries to managerial action and when means-ends ambiguity is high, allowing for multiple alternatives. By definition, discretion can emanate from conditions in the environment, the organization or the executives themselves, which can or not restrain the managers’ latitude of actions. For instance, industry deregulation, firm diversification, small firms with high concentration of power around the CEO or the executive’s tolerance for ambiguity, are all associated with highly discretionary managerial contexts (Hambrick and Finkelstein 1987). Hambrick and Finkelstein (1987) claimed that Upper Echelons theory offers good predictions of organizational outcomes in direct proportion on how much managerial discretion exists. That is, if we are in presence of a high discretion scenario, organizational outcomes are very likely to represent executive orientations. On the other hand, when managerial discretion is low, executive characteristics do not show vividly in their choices, namely because there are few or no genuine choices to be made (Finkelstein and Hambrick 1990).

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