Risk-taking behavior of technology firms: The role of performance feedback in the video game industry

Frederik B.I. Situmeang, Gerda Gemser, Nachoem M. Wijnberg and Mark A.A.M Leenders

Technovation, 2016, vol. 54, issue C, 22-34

Abstract: This study focuses on what drives technology-driven companies to engage in risk-taking behavior by serving new markets. Building on the behavioral theory of the firm and prospect theory, this study suggests that technology-driven organizations tend to respond to past performance rather than future possibilities. Using a sample of 5312 video games from 362 game developers, the results reveal that market performance trend and market performance variability have opposing effects on risk-taking behavior: while a positive market performance trend negatively influences a company's tendency to venture into new markets, a high-degree of market performance variability tends to positively influence new market entry. The study also finds opposite results for expert performance trend and expert performance variability: companies with consistently positive expert evaluations are more likely to enter into new markets, while variability in expert evaluations has a negative effect on new market entry. Furthermore, the effects of expert performance trend and variability are conditional on market performance trends. Finally, the results suggest that companies that venture into new markets tend to choose relatively similar markets if these companies are suffering from a negative market performance trend or a negative expert review trend.

Keywords: Performance trend; Performance variability; Market performance; Expert evaluations; Risk-taking behavior; New market entry (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166497216300165
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:techno:v:54:y:2016:i:c:p:22-34

DOI: 10.1016/j.technovation.2016.03.002

Access Statistics for this article

Technovation is currently edited by Jonathan Linton

More articles in Technovation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().