Performance Feedback and Risk-Taking: A Configurational Approach

Abstract

Based on the notion that organizations are complex systems, this study combines the con-figurational perspective with the performance feedback theory to explore constellationsof multi-level causal conditions that explain variations in firm risk-taking behaviour. Us-ing the fuzzy set methodology as our analytic approach, we derive multiple configurationsbased on a dataset of 1753 observations belonging to 402 firms from the US pharmaceu-tical industry. Our findings espouse equifinality and the differential importance of factorsdenoting a firm’sability,motivationandopportunityspace in determining low and highlevels of risk-taking. Across historical and social aspirations, our results disclose signifi-cant differences and similarities in constellations of causal conditions leading to high andlow levels of risk-taking, respectively. Our findings contribute to the behavioural theoryof the firm and have important implications for managerial practice.