In the highly competitive and dynamic global business environment, it is imperative for organizations to take risks, continually seek opportunities, and exploit new ventures to acquire a sizeable market share and ensure their survival. The understanding of how firms act enterprisingly has primarily focused on how companies identify and seize the opportunities, which are consistently measured in the satisfaction levels of the owners, the entity’s financial performance, and global expansion. However, these metrics reflect the leaders’ knowledge of the practices and procedures of the business, and are considerably subjective (Stambaugh et al., 2017). In the banking industry, which is considerably distinct from other financial institutions, risk taking is a prominent and a fundamental business driver since banks create value through liabilities. This implies that the managers’ financial risk-taking attitudes translate into observable behavior of the entity. Although entrepreneurial orientation is significantly connected to subjectively observed behaviors, innovativeness and proactiveness are positively linked to the risk-taking attitude in the banking sector.
Risk-taking is a critical component in the banking industry and a significant determiner in the realizable returns in the sector. However, the risk-taking or aversion tendencies are influenced by the entrepreneurial orientation dimensions, including the managers’ competitive aggressiveness and efficiency (Stambaugh et al., 2017). As a result, these inclinations impact the extent to which an entrepreneur is inclined towards risk aversion or risk-taking. This implies that the specific components which influence managerial decisions, such as zealousness in pursuing competitive advantage, reflect the leaders’ behavioral proclivity for openness to risk. However, such risk-taking inclination may not be appropriate in business whose value is not driven by liabilities. Consequently, it is vital to ensure that the dimensions of entrepreneurial orientation align with the nature of the industry since there is a direct relationship between the decision-making styles and the actual behavior of managers.
Reference
Stambaugh, J., Martinez, J., Lumpkin, G., & Kataria, N. (2017). How well do EO measures and entrepreneurial behavior match? International Entrepreneurship and Management Journal, 13(3), 717-737. Web.