How Are Other Elites Doing?: Social Identity, Comparison, and Aspiration of Corporate Elites in Firm Risk Taking

Abstract

Prior studies on organizational performance feedback resort to the industry peers for social aspiration referents, calling for a more theoretically refined approach. I consider how the CEOs elite identities affect their firm-level risk taking in response to negative performance discrepancy. This, I argue, demonstrates how the social identity of CEOs forms the basis of their social referent choice in their risk taking strategies in addition to the conventional industry peers. To explore these theoretical perspectives, I consider the Korean context where prestigious high school cohorts serve as a source of corporate elite social identity. The supportive empirical findings suggest that the CEOs elite identity intensifies the positive relationships between negative performance discrepancy and corporate acquisitions, a form of risk taking. This study contributes to the studies on performance feedback and organizational risk taking by proposing the CEOs elite-identity as a source of social comparison and a determinant of the CEOs social aspiration levels.