AN ORGANIZATIONAL-LEVEL
TEST OF A PARTIALLY MEDIATED MODEL OF RISKY DECISION MAKING BEHAVIOR
Phyllis
C. Panzano, Psychology Department, The Ohio State University,
1827 Neil Avenue, Columbus, OH 43210
Robert S. Billings, Psychology Department, The Ohio State University
ABSTRACT
A field
study involving fifty organizations investigated whether risk
perception and risk propensity mediated the effects of problem
framing and inertia on risk taking. At the organizational-level,
five of seven direct effect hypotheses and both hypotheses predicting
mediation were supported using an objective measure of risk taking.
INTRODUCTION
In
recent years, interest has grown in the role of risky decision
making in formulating and shaping organizational strategy. Much
of this research has aimed to understand the antecedents and consequences
of risk taking in organizations (e.g., Bromiley) but some important
unanswered remain. In fact, the literature is unclear about the
direction of the link between some determinants and risk taking
and about whether the effects of some determinants are direct
or indirect. For example, the threat rigidity hypothesis (Staw,
Sandelands & Dutton, 1981) suggests a negative link between
threat inferences and risk taking whereas prospect theory (Kahneman
& Tversky, 1979) suggests the relationship is positive. Further,
some authors suggest there is a direct link from threat inferences
to risk taking (e.g., Kahneman & Tversky; Staw et al) whereas
others contend the link is indirect (e.g., Sitkin & Pablo,
1992). Recent recognition of these apparent contradictions has
stimulated theoretical (e.g., March & Shapira, 1992; Sitkin
& Pablo) and empirical (e.g., Sitkin & Weingart, 1995)
endeavors which take a broader view of the decision making context
and a more careful look at cognitive processes preceding risky
decision making behavior.
Stimulated
by this recent work, our study is an extension of the laboratory
studies of Sitkin and Weingart (1995) because we test many of
the same hypotheses and devote considerable attention to the link
between frames, risk perception and risk decision making. However,
we expand on their work in a number of important ways. Our investigation:
1) is a field as opposed to a lab study, 2) uses the organization
as opposed to the individual as the unit of analysis (e.g., Rousseau,
1985), 3) employs an objective, global measure of organizational
risky decision making as the dependent variable rather than a
subjective, speculative measure, and 4) proposes that risk propensity
and risk perception function as partial as opposed to full mediators
of the effects of our antecedent variables.
A
MEDIATED MODEL OF RISK TAKING BEHAVIOR BY INDIVIDUALS
Sitkin
and Pablo (1992) considered research related to individual, organizational
and problem-related variables which traditionally have been identified
as direct determinants of risky decision making by individuals.
They concluded much of the prior research in this area is fragmented
and issue-oriented and, consequentially, has resulted in oversimplified,
direct-effect models. Further, they asserted that many of these
variables impact risk taking behavior indirectly through their
effects on risk propensity (i.e. inclination to take or avoid
risk) and risk perception (i.e. assessment of the risk inherent
in a situation). They developed a mediated-model of individual
risk taking behavior to guide future research which specifies
3 factors expected to operate through risk propensity (e.g., inertia)
and 6 factors expected to operate through risk perception (e.g.,
problem framing) to impact risk taking behavior.
Sitkin
and Weingart's (1995) 2 lab studies tested part of Sitkin and
Pablo's (1992) broader mediated model. They focused on two frequently
studied predictors of risky decision making, outcome history and
problem framing and assessed risk propensity, risk perception
and risky decision making. Their findings clearly suggest risk
propensity and risk perception should be included as mediating
variables in models of risky decision making behavior.
Research
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