Research: Unraveling the Link Between Managerial Risk-Taking and Innovation - the Mediating Role of a Risk-Taking Climate

It all starts with an idea?

Producing creative ideas is considered to be the first and most critical step in the innovation process. While this is certainly true when looking specifically at an innovative process, questions arise when we try to understand which factors create an environment that gets the creative juices flowing.

Previous research has examined three key perspectives for understanding this question: managerial risk-taking propensity, risk-taking climate and innovation performance. The authors of this latest study have built on these various perspectives to offer researchers and practitioners a more global vision of the link between these three factors.

This latest study surveyed 182 Spanish and Italian ceramic tile manufacturers to determine the mediating effect of a risk-taking climate. In other words, the researchers interviewed participating companies to determine how a manager's risk-taking impacts company climate. They then studied the effects of this risk-taking climate on innovative performance across all levels of a company.

The role of managers

Previous research often underlines the critical role of managers in the innovation process. The authors results demonstrated a positive relationship between managerial risk-taking and the creation of a risk-taking climate. As a result, a manager's willingness to take risks is not only directly linked to creating an innovative idea, but also tied to the development of a company climate that supports risk-taking.

The importance of company-wide risk-taking

The second link put forth by the authors emphasizes the connection between innovative performance and a risk-taking climate. The researchers confirmed employees were able to integrate risky behaviors when they perceived there to be a favorable risk-taking climate. The crucial third conclusion given by the authors highlights the link between individual manager risk-taking and innovative performance via the manager's ability to create a climate that encourages risk-taking.

Be a risk-taker to encourage risk-taking

This analysis provides empirical evidence to fill gaps in theory and help understand the effects of managerial risk-taking on all levels of an organization. The authors results highlight the indirect link between managerial risk-taking and innovative performance. Not only is it possible for a manager to achieve an innovative result by taking a risk, but the act of risk-taking encourages a risk-taking climate which may lead to increase innovative performance across the company.

This conclusion has practical implications for companies seeking to promote innovation. For example, by encouraging a company-wide risk-taking climate, leaders may mitigate the risks of losing key managers known for their risk-taking capabilities. By encouraging all employees to participate in the innovative process, the chances of success go beyond a single executive's risk-taking personality.

Ana Garcia-Granero

Ana Garcia-Granero is a post-doctorate researcher in the Management, Technologies and Strategy department. Her research interest focuses on open innovation, organizational learning, business models and composition of TMTs. She draws from fields such as strategic management, policy, and economics. She is a member of the Business Model Reconfiguration research team.

Key Points

• Managerial risk-taking can help create a climate that encourages risk-taking at all levels.
• Innovative performance can be bolstered by creating a company-wide risk-taking climate.
• A risk-taking climate helps all employees participate in the innovative process.