Keywords

behavioral theory of the firm, corporate social performance, financial performance– safety link, organizational safety, profit motive, U.S. airline industry

Abstract

In many industries, for-profit business organizations make decisions that critically impact the safety of their employees and the public. Managers in such organizations often argue that there is no trade-off between profitability and safety because “safety is good business.” However, prior studies examining the profitability–safety relationship report inconsistent and conflicting results. In the present study, the author reexamines this issue, building on insights into managerial risk taking from the behavioral theory of the firm and hypothesizing that the slope of the profitability–safety relationship reaches an inflection point at the organizational profitability aspiration. Using data from the U.S. airline industry, the author finds support for this hypothesis, with results indicating a positive association between airline profitability and airline accident rates for airlines performing below their aspirations but a negative association for airlines performing above their aspirations.

Original Publication Citation

"Perils and profits: A re-examination of the link between profitability and safety in U.S. aviation", Journal of Management, 2013