May Bad Luck Be Without You: The Effect of CEO Luck on Strategic Risk-Taking
University of Zurich, Institute of Business Administration, UZH Business Working Paper No. 393, 2022
42 Pages Posted: 22 Jun 2022 Last revised: 30 May 2024
Date Written: May 28, 2024
Abstract
CEOs’ strategic actions are traditionally viewed as independent of luck because CEOs focus on skill-based capability cues. We draw on attribution theory to argue that CEOs often misattribute luck—perceiving good luck as high skill and bad luck as low skill—which impacts their strategic risk-taking. Contrary to notions of self-serving behavior, we theorize that CEOs react more strongly to bad luck, especially when they have prior negative experiences affecting their tendency for internal attribution of bad luck. By measuring luck as the exogenous component of recent firm performance, we find supporting evidence for our hypotheses, suggesting that luck has a meaningful and systematic effect on CEO behavior and thereby subsequent firm trajectories.
Keywords: Strategic Risk-Taking; Chief Executive Offers; Luck; Upper Echelons; Behavioral Strategy
JEL Classification: D22, D91, G30, M10, L20
Suggested Citation: Suggested Citation