The microfoundations of firm risk-taking: CEO origin, temporal orientation, and cognitive focus

Abstract Why some chief executive officers (CEOs) pursue risk-taking at the firm level while others favor caution remains a foundational question in management. We adopt the microfoundations perspective to tackle this question. As we examine the impact of CEO origin on firm risk-taking, we further investigate how CEO origin interacts with contingencies – temporal orientation and cognitive focus – to shape firm risk-taking. We assert that outsider CEOs are more likely to pursue risk-taking, while such an effect is attenuated by the temporal orientation of short-termism, and reinforced by the temporal orientation of long-termism and the cognitive focus of broader attention. Using a 20-year panel dataset of the S&P top 100 firms, we offer insights into firm risk-taking particularly under the conditions that better explain why CEOs could differ in firm risk-taking. By linking executive characteristics to behavioral context from the microfoundations perspective, we offer an integrated framework of firm risk-taking.