Performance, Satisfaction, or Loss Aversion? A Meso–Micro Assessment of Local Commitments to Sustainability Programs

Abstract

Abstract A normative assumption of government reform efforts such as New Public Management is that fostering a more innovative, proactive, and risk-taking organizational culture—developing what has been described as an “entrepreneurial orientation” (EO)—improves performance. But in arenas like urban sustainability, performance can be an ambiguous, multifaceted concept. 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. This study examines how meso-level organizational decisions impact managers’ individual risk-assessments of sustainability initiatives. We do so through a combination of Bayesian structural equation modeling of US local government survey data collected over two time periods, and an artifactual survey experiment with empaneled local government employees. This multimethod design allows us to examine the role of organizational performance and EO—meso-level learning heuristics—in shaping the micro-foundations of managerial risk assessment. The organization-level observational results indicate that local governments engage in risk-seeking behavior in order to minimize their potential for losses of prior effort. Experimental results confirm local government administrators are loss-averse when asked to evaluate the merits of initiating a hypothetical sustainability program.