Entrepreneurial orientation and firm value: Does managerial discretion play a role?

Considerable interest exists in understanding the extent to which entrepreneurial orientation (EO) generates value in the capital markets. Drawing on insights from the discretion literature, we focus on three distinct loci of managerial discretion-organizational, industrial, and national-to examine their contingent influence on the EO-value relation. Predictions were tested on a panel dataset of firms from five advanced economies listed in the Forbes 2000 ranking. Data were analyzed using ordinary least squares to reveal that the contribution of EO to firm valuation is statistically significant and economically meaningful when organizational and/or industrial discretion are high: each unit increase in EO boosts value generation by 7.4 % when organizational discretion is high and 5.6 % when industrial discretion is high. EO therefore creates value for the firm in capital markets when the appropriate discretionary conditions are present. These findings suggest that the relation between EO and capital market value is more complex than generally believed.