Both upper echelons theory and the behavioral theory of the firm (BTOF) have made important contributions to our understanding of the drivers of managerial risk-taking. Yet, how the individual- and organizational-level mechanisms espoused by these theories act in concert to determine risk-taking is not well understood. In this paper, we draw on regulatory focus theory as a fulcrum to bridge these two levels of analyses and integrate insights from both theoretical traditions. Consistent with the BTOF, we argue that promotion-focused CEOs engage in increased (decreased) risk-taking under conditions of performance below (above) aspirations. In contrast to the predictions of the BTOF, however, we predict that prevention-focused CEOs engage in increased (decreased) risk-taking under conditions of performance above (below) aspirations. We find support for these arguments in a large sample of CEOs from publicly listed U.S. firms and discuss the implications of our findings for both theory and practice.
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