Organizational Risk Taking: Adaptation versus Variable Risk Preferences

Denrell, Jerker (2008) Organizational Risk Taking: Adaptation versus Variable Risk Preferences. Industrial and Corporate Change, 17 (3). pp. 427-466.

Abstract

The observed association between performance and organizational risk taking has usually been attributed to the influence of performance on risk preferences. Here I show how a simple model of adaptation, which only assumes that organizations avoid activities with poor past performance, can explain the empirically observed U-shaped association between risk and return. The model also makes novel predictions, which are shown to be consistent with the data. The findings suggest that risk taking may be a by-product of adaptation rather than a deliberate choice motivated by variable risk preferences.

Item Type: Article
Keywords: Risk management; Organizational behaviour; Models
Subject(s): Strategy; Entrepreneurship & Global business
Centre: Faculty of Strategy, Entrepreneurship and International Business
Date Deposited: 11 Feb 2012 18:28
Last Modified: 23 Oct 2015 14:07
URI: http://eureka.sbs.ox.ac.uk/id/eprint/2630

Actions (login required)

Edit View Edit View