Developing opportunities in times of crisis: The interactive effects of corporate entrepreneurs' emotional reactions and psychological climates

Abstract Research Summary This research investigates how corporate entrepreneurs' emotional reactions to the business impact of a crisis interact with psychological climates to drive engagement in opportunity formation. Drawing on affective events theory and psychological climate theory, we posit that positive emotional reactions increase engagement in opportunity formation when the psychological climate for initiative is strong, and negative emotional reactions increase engagement when the psychological climate for psychological safety is strong. Conversely, these relationships become negative when these climates are weak. An analysis of data from an eight‐wave longitudinal investigation involving 126 corporate entrepreneurs supports our predictions. By uncovering how corporate entrepreneurs' emotional reactions interact with climates for initiative and psychological safety, we illuminate the affective foundations of opportunity formation and show how organizations can foster climates that channel emotions into entrepreneurial action. Managerial Summary This study examines how corporate entrepreneurs' emotional reactions to crises interact with psychological climates to shape entrepreneurial actions. Our findings demonstrate that organizations should cultivate climates characterized by high personal initiative and psychological safety among middle managers. Managers' perceptions of such climates effectively harness both positive and negative emotional reactions for productive entrepreneurial actions, thereby facilitating corporate entrepreneurship. These insights are particularly marked for firms in disrupted industries, where conventional business approaches become obsolete in a crisis. Absent such organizational climates, managers' emotional reactions can discourage them from taking initiative on new opportunities, making it more difficult for the organization to transform and adapt.