Indulgence and risk-taking behavior of firms: Direct and interactive influences

This study examines the impact of Hofstede's indulgence vs restraint national culture dimension (IVR) on firms' risk-taking behavior. We argue that firms in more indulgent societies will show greater risk-taking behavior given their tendencies to be less rigid and their greater inclination...

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Bibliographic Details
Published in:Journal of international management 2022-06, Vol.28 (2), p.100945, Article 100945
Main Authors: Alipour, Ali, Yaprak, Attila
Format: Article
Language:English
Subjects:
Growth opportunities
Indulgence
National culture
Risk-taking behavior
Slack resources
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Summary:This study examines the impact of Hofstede's indulgence vs restraint national culture dimension (IVR) on firms' risk-taking behavior. We argue that firms in more indulgent societies will show greater risk-taking behavior given their tendencies to be less rigid and their greater inclination for discounting risk-taking losses. We further argue that the buffers that slack resources provide against risk-taking losses and the positive expectations of potential gains from risk-taking provided by growth opportunities will further increase firms' risk-taking behavior when interacting with indulgence mechanisms. Our findings from a 37-country study support these arguments. They show that high indulgence does increase firms' risk-taking behavior and slack resources and growth opportunities intensify this causal effect. Tests of three-way interactions further reveal that the positive impact of indulgence on firms' risk-taking behavior is strongest when both slack resources are abundant and the growth opportunities are high. We extend current knowledge about culture's effect on firm behavior.
ISSN:1075-4253
1873-0620
DOI:10.1016/j.intman.2022.100945