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All risk-taking is not the same: examining the competing effects of firm risk-taking with meta-analysis


Although researchers have vigorously studied organizational risk-taking for over 35 years, relatively little emphasis has been placed on theoretically differentiating the unique relationships between the many risk-taking choices organizations make and firm risk or firm performance. In this research, we propose a new framework that builds from March’s exploration–exploitation model to argue that different risk-taking choices can have substantially different influences on firm outcomes. We use meta-analysis to examine the unique and at times competing effects of four of the most commonly studied risk-taking choices on firm risk and firm performance. Results from a meta-analysis of 257 unique studies (N = 499,808) demonstrate support for our proposed framework and cast significant doubt on the idea that commonly studied firm risk-taking choices theoretically aggregate into one overarching risk-taking construct.

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  1. This definition of risk differentiates it from uncertainty (Knight 1921) and is derived from previous definitions used by Wright et al. (1996), Bloom and Milkovich (1998), and Sanders and Hambrick (2007). Acknowledging that capturing the full spectrum of outcomes by including downside as well as upside variation differentiates this study from more recent conceptualizations of risk as negative or downside outcomes (e.g., Miller and Leiblein 1996; Reuer and Leiblein 2000); we still believe that capturing all variation fits better with our theory and intention to examine outcomes of risk-taking.

  2. We note that although debt is a common proxy for risk-taking and was included as such, its implications for firm risk and performance are unrelated to exploration and exploitation.

  3. Knight (1921) differentiated risk from uncertainty due to its use of a quantifiable probability distribution of outcomes.

  4. It is important to note that there could be a U-shaped relationship between debt and firm risk. However, the nature of meta-analytic data makes such non-linear forms impossible to effectively assess.

  5. This is important because debt and equity may substitute for each other and are also often measured relative to each other (e.g., debt/equity).

  6. Other potential firm performance indicators were also considered for inclusion in our work, but given their lack of similar substantial coverage in the literature, we were limited in our ability to include them in our analyses.

  7. We used Sobel (1982) tests to examine the degree to which the path between risk-taking and firm performance was mediated by firm risk. We tested all significant relationships between R&D, capital expenditures, advertising expenditures, and debt to both types of firm performance as mediated by either firm risk variable. The only significant path was between R&D expenditures and Tobin’s Q as mediated by systematic firm risk (significant at p < 0.05 in Sobel test). Although meta-analysis limits the precision of temporal specification, the lack of mediation results suggest that we have much more to learn about risk-taking, firm risk, and firm performance.


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Correspondence to Amanda L. Christensen.

Additional information

References to studies that are used in the meta-analysis are available in the supplemental Appendix.

Appendix: Supplemental appendix

Appendix: Supplemental appendix

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Arrfelt, M., Mannor, M., Nahrgang, J.D. et al. All risk-taking is not the same: examining the competing effects of firm risk-taking with meta-analysis. Rev Manag Sci 12, 621–660 (2018).

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  • Firm risk
  • Risk-taking
  • Meta-analysis