Dynamics of Managerial Risk Attitudes & Structural Change in the Steel Industry

Leitner, W. (1988). Dynamics of Managerial Risk Attitudes & Structural Change in the Steel Industry. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-88-070

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Abstract

During the recent decade, management science has become more and more interested in the strategic aspects of management. The changing social, economic, and technological environment of a company is a major challenge to which management should respond. Strategic management is regarded as a tool to increase organizational flexibility in order to overcome fluctuations originating mainly from the business cycle or from market changes.

In order to investigate empirically how companies faced this challenge, MTC developed a methodology for analyzing long-term changes of management strategies. A dynamic approach is applied in this paper which reports about the preliminary results of a study carried out in order to test this methodology.

Technological change, as well as any other kind of innovation, is traditionally associated with the idea of being potentially more risky than business as usual. Therefore, managerial risk taking behavior, measured quantitatively by use of appropriate business ratios, is regarded as an indicator for the strategic behavior of firms. The hypothesis of whether entrepreneurial risk attitudes change along the organizational life cycle is tested in this paper. A small sample of steel companies was analyzed for that purpose since the steel industry is very well suited to such a longitudinal study, thus extending IIASA's research activities on long-term economic cycles to the company level.

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