The article “Performance feedback and information processing: How do organizations regulate risk-taking?” co-authored by Dr Sobrepere and Professor Keil has been selected for publication in Academy of Management Best Paper Proceedings 2019.
In this paper, we move beyond the mechanistic approach taken to performance feedback in the Behavioral Theory of The Firm (BTOF) and we discuss how performance feedback drives decision makers’ information processing regarding risky opportunities. In particular, we propose that organizations process information regarding two attributes characterizing risky opportunities (magnitude of potential losses/gains and the likelihood of adverse/positive outcomes) depending upon two dimensions of performance feedback (performance level and deadline proximity). We test our ideas by analyzing 26,514 fourth down decisions from the National Football League (NFL) between seasons 2009–2016. Specifically, we show that organizational risk-taking becomes more sensitive to the magnitude of the potential losses/gains as the distance of performance from the aspiration level increases (both below and above aspirations), and simultaneously less sensitive to the likelihood of adverse/positive outcomes; we further show that as the deadline to meet the goal approaches, organizational risk-taking becomes less sensitive to the two attributes characterizing the risky opportunity and more so to the current level of performance.