Risk-Taking

Risk taking is the willingness to accept the level of risk associated with a certain decision. In other words, it refers to making decision that entails risk. In this article, we focus on managerial risk-taking. We discuss the variable risk preference model in depth, summarize the effect of performance feedback on risk-taking, and highlight some of the strategy research on risk-taking that takes the upper echelon perspective of organizations. The variable risk preference model assumes that managers have two reference points in making risky decisions – aspiration point and survival point – and which reference point they pay attention to affects their risk-taking behavior. Performance feedback has an influence on risk-taking that often makes decision-makers take a more longitudinal perspective and change their risk attitudes. Some strategy research on managerial risk-taking that adopts the upper echelon perspective examines the linkages between trait and risk-taking behavior and between incentive structure and risk-taking.