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Organizational Risk Aversion: Comparing The Public and Non-Profit Sectors

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  • Chung-An Chen
  • Barry Bozeman

Abstract

Conventional wisdom of ‘sector matters’ suggests that those working in the government are more risk averse than those employed by business enterprises. However, whether public sector workers tend to be more risk averse than non-profit sector workers is unknown. Our paper examines whether the levels of organizational risk aversion as perceived by managers differ between public and non-profit organizations and explore reasons leading to this potential difference. Statistical results show that organizational risk aversion is more pervasive in the public sector than in the non-profit sector. Mediation tests further indicate that managerial trust and an organization's formalized rule constraints in rewarding good performers and removing poor performers are decisive to this difference. The findings imply that the top management's feeling of insecurity and structural reasons embedded in the merit system are the keys to organizational risk aversion in the public sector.

Suggested Citation

  • Chung-An Chen & Barry Bozeman, 2012. "Organizational Risk Aversion: Comparing The Public and Non-Profit Sectors," Public Management Review, Taylor & Francis Journals, vol. 14(3), pages 377-402, March.
    • Handle: RePEc:taf:pubmgr:v:14:y:2012:i:3:p:377-402
    DOI: 10.1080/14719037.2011.637406
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    Cited by:

    1. Rinor KURTESH, 2018. "A Systematic Review Of The Internal And External Barriers To Public Sector Innovation In Kosovo," Business Excellence and Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 8(3), pages 12-23, September.
    2. Arundel, Anthony & Bloch, Carter & Ferguson, Barry, 2019. "Advancing innovation in the public sector: Aligning innovation measurement with policy goals," Research Policy, Elsevier, vol. 48(3), pages 789-798.
    3. Volker Stein & Arnd Wiedemann, 2016. "Risk governance: conceptualization, tasks, and research agenda," Journal of Business Economics, Springer, vol. 86(8), pages 813-836, November.
    4. Michal Livnat-Lerer & Raanan Sulitzeau-Kenan & Tehila Kogut, 2018. "Foresighted outcome effect: A micro-foundation of agents’ risk aversion in principal-agent relations," Journal of Behavioral Public Administration, Center for Experimental and Behavioral Public Administration, vol. 1(1).
    5. Lu Chen & Ming Yuan & Han Lin & Yilong Han & Youyou Yu & Caihui Sun, 2023. "Organizational improvisation and corporate green innovation: A dynamic capability perspective," Business Strategy and the Environment, Wiley Blackwell, vol. 32(8), pages 5686-5701, December.
    6. Carrera, Nieves & Mareque, Mercedes, 2023. "Does gender affect qualifying decisions? Evidence from public sector audits," Journal of Business Research, Elsevier, vol. 154(C).
    7. Torugsa, Nuttaneeya (Ann) & Arundel, Anthony, 2017. "Rethinking the effect of risk aversion on the benefits of service innovations in public administration agencies," Research Policy, Elsevier, vol. 46(5), pages 900-910.
    8. Shuping Wu & Zan Yang, 2023. "Government Behavior on Urban Land Supply: Does it Follow a Prospect Preference?," The Journal of Real Estate Finance and Economics, Springer, vol. 67(2), pages 264-286, August.
    9. Rob Kim Marjerison & Matthew Andrews & George Kuan, 2022. "Creating Sustainable Organizations through Knowledge Sharing and Organizational Agility: Empirical Evidence from China," Sustainability, MDPI, vol. 14(8), pages 1-23, April.
    10. Iana Shaheen & Arash Azadegan & Samuel Roscoe, 2021. "Who Takes Risks? A Framework on Organizational Risk‐Taking During Sudden‐Onset Disasters," Production and Operations Management, Production and Operations Management Society, vol. 30(11), pages 4023-4043, November.

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