Towards a Multi-Dimensional Perspective of Performance Feedback and Risk Taking

Abstract

This study investigates the implications of different conceptualizations of risk taking and aspirations in performance feedback theory. We review recent literature and find that: 1) aspirations are conceptualized with reference to current performance and accumulated wealth, and 2) risk taking is conceptualized as the propensity to take risks and the amount to put at stake. We conduct simulation experiments to explore the implications of these different conceptualizations. We find that different conceptualizations lead to inconsistent organizational outcomes, such as long-term performance and survival rates. We also used data from Texas Hold 'Em poker games to study decision makers' risky choices. We find that conclusions drawn about the effects of performance on risky choice depend on the conceptualizations at play. Taken together, these results point to a significant gap in the literature with potential for much fruitful future work.

Keywords: Performance feedback theory, risk taking, risk propensity, risk amount, current performance, accumulated wealth, simulation, empirical exploration