Manager risk preferences and firm training investments

The importance of personal preferences for economic and educational choices is documented in a quickly growing strand of literature. Among others, risk attitudes have been identified as important determinants for individual economic choices. However, the literature studying the influence of a decision maker’s preferences on training choices has been less prominent. This paper aims to contribute to the literature by providing results of a discrete choice experiment among decision makers in German firms. It addresses the question, how risk attitudes of key decision makers relate to their choices to invest in worker training.
The data used for the empirical analysis stems from a unique firm-level survey providing both the discrete choice experiment and measures for the risk attitudes of respondents who have decision-making power in the firm (i.e. owners/partners, managers, heads of a HRM department). Risk attitudes are surveyed in the form of a direct assessment, i.e. the respondents report their willingness to take risks. This procedure of measuring risk attitudes is identified as the most valid in experimental settings in the literature.
We draw on a mixed logit models to assess decision makers’ preferences for granting continuing training to workers who differ in their age, their gender, their mobility and their professional competencies. Furthermore, the choice experiment includes attributes of the training to be granted. These comprise the transferability of the training, its duration and its cost coverage. Based on this framework, we expect that higher personal preferences for risk are positively related to the willingness to invest in general (transferable) continuing training.
The findings support the notion that economic preferences of decision makers in a firm are important determinants for firm-level choices. As expected, a higher willingness of the decision maker to take risks corresponds to a higher likelihood to invest resources into mobile and transferable training when compared to a decision maker with a lower willingness to take risks. The analysis in this paper contributes to the literature by showing that firms’ training decisions may be contingent on person-level preferences, a link that has rarely been studied based on experimental settings. The results have strong implications for theoretical models explaining strategic firm behavior in competitive markets.