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Indiana University Bloomington

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Explore Business Horizons, the Kelley School's
bimonthly journal publishing original articles of interest to business academicians and practitioners. Marc J. Dollinger, professor of business administration, serves as editor-in-chief.

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Managerial Conservatism and Rational Information Acquisition

1992, Journal of Economics & Management Strategy

Eric Bennett Rasmusen

Abstract

Conservative managerial behavior can be rational and pro t-maximizing. If the valuation of innovations contains white noise and the status quo would be preferred to random innovation, then any innovation that does not appear to be substantially better than the status quo should be rejected. The more successful the rm, the higher the threshold for accepting innovation should be, and the greater the conservative bias. Other things equal, more successful rms will spend less on research, adopt fewer innovations, and be less likely to advance the industry's best practice.

Citation

Rasmusen, Eric Bennett (1992), "Managerial Conservatism and Rational Information Acquisition," Journal of Economics and Management Strategy, Vol. 1, No. 1, Spring, 175-202.