When Does a CEO's Risk Propensity Drive Exploration in Product Development?

This article examines how a CEO's risk propensity—defined as a relatively stable behavioral inclination toward taking or avoiding risk—influences a firm's tendency to explore new product development, focusing on 219 publicly traded U.S. prepackaged software firms from 1990 to 2001. The study finds that a CEO's risk proneness positively drives exploration primarily when the CEO has substantial power within the firm, as indicated by longer tenure, holding both CEO and board chairperson roles (duality), and insider origin. Contrary to expectations, accumulated firm experience with exploration weakens this effect, suggesting firms seek a balance between exploration and exploitation and may resist excessive exploration even under a risk-prone CEO. Additionally, competitive pressure in the product market strengthens the CEO's ability to promote exploration. These findings highlight that a CEO's risk propensity alone does not determine exploration tendencies; rather, its impact depends on organizational power structures, prior exploration experience, and environmental conditions.