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Toward an Entrepreneurial Public Sector

An entrepreneurial public agency pursues the implementation of innovative programs that may broaden public service choices, increase service quality, and more effectively serve citizens. Such public entrepreneurship depends on risk taking and risk tolerance; however, public servants tend to be generally risk averse in their behaviors and personal preferences, and are therefore less likely to pursue entrepreneurial approaches to public problems. Using social exchange theory as a framework to understand the reciprocal relationship between agency and employee, this study examines whether agency behaviors might alter the risk aversion of those employees and make the agency environment more conducive to entrepreneurship. Findings suggest that managers’ demonstration of risk tolerance, reward for creativity and innovation, and agency solicitation of employee input are positively related to employee perceptions of higher risk tolerance among their peers.