Regulatory Uncertainty and Managerial Attention in the U.S. Renewable Electricity Industry

Abstract

Top managers’ attention to new problems has important consequences for the firm and is often triggered by external factors such as regulatory uncertainty. In this research we draw from behavioral theories of uncertainty avoidance and managerial attention to examine how headquarter and subsidiary top managers allocate attention to a new problems with and without regulatory uncertainty. We find subsidiary top managers exhibit classic uncertainty avoidance by reducing attention to new problem in uncertain as compared to certain settings, while headquarter top managers increase their attention to new problems under regulatory uncertainty. We test these ideas using a setting where U.S. electric utility firms are attending to a relatively new sector: renewable electricity, from 2000 to 2010.