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Organizational Risk Taking: Adaptation versus Variable Risk Preferences

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 ma...

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Jerkel Denrell More by this author
Publication date:
2008
URN:
uuid:3caf5ef6-14dc-46f8-959e-412ceefc35c2
Local pid:
oai:eureka.sbs.ox.ac.uk:992

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