Mammen J (2021)
Publication Type: Journal article, Review article
Publication year: 2021
Book Volume: 19
Pages Range: 470-476
Journal Issue: 1
DOI: 10.21511/ppm.19(1).2021.39
Performance feedback is an important concept to explain managerial risk taking. This paper aims to distinguish between two forms of performance feedback: A performance shortfall can be positively or negatively associated with risk inclination. The first effect arises for a shortfall from aspirations, while the second effect occurs if there is a shortfall from expectations. The hypotheses are tested on a sample of S&P 1500 firms over a period of 19 years (1992-2010) using a fixed effects regression model. The empirical results suggest that missing aspirations increases the likelihood of risk taking in the form of higher strategic investments. Missing expectations in contrast diminishes managerial power and discretion to engage in risk taking and thus lowers strategic investments. The results further support the idea that both effects reinforce each other, suggesting that shortfalls from expectations and aspirations have an interactive effect. By distinguishing between these two sides of performance feedback, this study provides an improved understanding on managerial risk taking. Additionally, this paper highlights how motivation and power interact when analyzing managerial risk taking.
APA:
Mammen, J. (2021). How aspiration and expectation shortfalls drive strategic investments. Problems and perspectives in management, 19(1), 470-476. https://dx.doi.org/10.21511/ppm.19(1).2021.39
MLA:
Mammen, Jan. "How aspiration and expectation shortfalls drive strategic investments." Problems and perspectives in management 19.1 (2021): 470-476.
BibTeX: Download