CEO Risk-Tolerance and Firm Internationalization Patterns

Beskrivning

The research project aims to shed light on the relationship between CEOs' risk-tolerance and their internationalization decisions. The project addresses the behavior, priorities, and concerns of decisionmakers in organizations - themes that are quintessential for studying organizations. The central issue addressed within the project echoes previous studies related to internationalization, namely: How do decision-makers of firms, under conditions of uncertainty and partial ignorance, decide to commit financial and other resources to individual investment projects, in situations where these resources will be difficult or impossible to recoup, should the project considered turn out to be unprofitable? Explicitly, the research project aims at investigating three observable internationalization decisions that are likely to be affected (even if unconsciously so) by a CEO’s innate risk-tolerance.

First, we expect that a CEO who is more risk tolerant is more likely to ignore the distance between a new potential business market and his or her home market. We call this the psychic distance hypothesis. We also want to see if a CEO's fWHR is associated with simultaneous internationalization patterns. A central assumption in internationalization theory is that firms prefer to internationalize in incremental steps, starting in business markets close to their home market. What we call the simultaneous hypothesis aims to test this assumption and investigate possible systematic differences that may be due to a CEO's risk tolerance. Finally, we want to test our empirical hypothesis which suggests that a risk-tolerant CEO will prefer to allocate resources abroad compared to a risk-intolerant CEO. Data from a large number of Swedish multinationals over their entire lifetime forms the empirical base.