Local Managers, Loss Aversion, and Sustainability Performance: A Macro-Micro Assessment of Risk

EasyChair Preprint 1099

Abstract

Decades of research in psychology and behavioral economics has established that human beings deviate from rational utility maximization in their consumer, employment, and health choices. A normative assumption of government reform efforts such as New Public Management (NPM) is that fostering a more innovative, proactive, and risk-taking organizational culture -- developing what has been described as an “entrepreneurial orientation” (EO) -- is a net positive for improved performance (Bellone and Goerl 1992; Osborne and Gaebler 1992; Swann 2017). But in arenas like urban sustainability and resiliency, performance can be an ambiguous, multifaceted concept, with many definitions that can determine how a city government approaches development (Zeemering 2014). Managers’ assessments of their own nimbleness, innovative thinking, and risk culture are also likely to influence how they interpret the risk-reward balance of opportunities to enhance organizational performance and sustainability. Thus, our central research questions are, how do managers assess the risk of sustainability initiatives, and how do these assessments influence organizational commitments? We address these questions through a novel multi-method research design which examines the role of organizational performance and EO at both an institutional and individual level. The results indicate that local governments engage in risk-seeking behavior in order to minimize their potential for losses of prior effort. An experimental extension confirms local government administrators are loss-averse when asked to evaluate the merits of a hypothetical sustainability program, although senior-level administrators appear less so.

Keyphrases: Local sustainability, local government management, loss aversion

@booklet{EasyChair:1099,
  author    = {Aaron Deslatte and William L. Swann and Richard Feiock},
  title     = {Local Managers, Loss Aversion, and Sustainability Performance: A Macro-Micro Assessment of Risk},
  howpublished = {EasyChair Preprint 1099},
  year      = {EasyChair, 2019}}