The
first 2 hypotheses suggest risk propensity partially mediates
the effects of inertia on risky decision making, in light of the
assertion that the effect of inertia transcends situational factors.
Therefore, our third hypothesis (H3) states: TMT risk propensity
will partially mediate the effects of organizational inertia on
risky decision making.
Because
problems can be framed in multiple ways, the theoretical relevance
of a frame depends on the context and the response(s) being studied.
Threat/ opportunity frames and component elements (e.g., gain/loss,
positive/ negative) are most often studied in investigations of
risky decision making (e.g., Kahneman & Tversky, 1979).
Yet,
questions exist regarding the direction of the relationship between
threat/opportunity frames and risky decision making. Hypotheses
4, 5 and 6 (see Figure 1) relate to these linkages and are based
on a synthesis of March and Shapira's (1992) ideas related to
focus-of-attention effects and Sitkin and Pablo's (1992) views
about the role of risk perception as a mediator of risky decision
making behavior. Combining these ideas, we argue that the direction
of the linkage between problem framing and risky decision making
behavior depends on whether the decision maker's attention is
focused on survival or aspirations. We assert that this focus
also has implications for risk perception. Specifically, when
survival is the focus-of-attention, we posit that threat frames
will be associated with high perceived risk (e.g., salient threat
to survival/existence) and opportunity frames will be associated
with low perceived risk (e.g., threat to survival is remote).
In contrast, when aspirations are the focus-of-attention, we contend
threat frames will be associated with low perceived risk (e.g.,
little/nothing to lose) and opportunity will be associated with
high perceived risk (e.g., salient threat to assets). Finally,
we contend that the difference in the relationship between threat/opportunity
and risk perceptions across focus (i.e., survival vs aspiration)
explains the difference in the predicted direction of the relationship
between threat/opportunity inferences and risk taking.
We
assert that the organizations in our study are primarily focused
on survival, not aspirations based on qualitative data from our
survey, public statements, and legal action suggesting that CMHBs
were concerned with survival. Our fourth (H4) and fifth (H5) hypotheses
reflect an assumed focus on survival and the reasoning expressed
above: (H4) - When survival is the focus of attention, there opportunity
inferences are positively linked to risky decision making; ( H5)
- When survival is the focus of attention, opportunity inferences
are negatively linked to risk perception.
.
Yet, hypotheses 4 and 5 don't clarify whether problem framing
is fully or partially mediated by risk perception. We posit partial
mediation. First, empirical data (e.g., Sitkin and Weingart, 1995)
suggests partial mediation. Second, because there is conceptual
similarity but not identity between the threat/opportunity construct
and risk perception (e.g., both are related to gain/loss perceptions
but only threat/opportunity perceptions are linked to perceptions
of feasibility)(e.g. Jackson & Dutton, 1988), we expect threat/opportunity
inferences to explain variability in risky decision making behavior
that goes beyond the variability explained by risk perception.
Our sixth hypothesis (H6) expresses this reasoning: The effect
of opportunity/threat perceptions on risky decision making behavior
is partially mediated by risk perception.
Empirical
evidence suggests that risk propensity influences risk perception
through its effects on the estimation of the likelihood of loss
versus gain inherent in a situation. This linkage is supported
by Sitkin & Pablo's, (1991) work and Sitkin and Weingart's
(1995) findings. Our seventh hypothesis (H7), therefore, predicts:
There will be a negative association between risk propensity and
risk perception.
Given
evidence that intentions to act in a given way are typically strong
predictors of actual behavior, it is logical that risk propensity
would be linked to risky decision making behavior. In fact, empirical
evidence including recent findings by Sitkin & Weingart (1985)
support this linkage and lead to the predicted direction of the
link expressed in our eighth hypothesis (H8): TMT risk propensity
will be positively linked to risky decision making behavior.
Neither
prospect theory (Kahneman & Tversky, 1979) nor the threat
rigidity hypothesis (Staw et al, 1981) directly address the issue
of risk perception Yet, Sitkin and Pablo's (1992) analyses of
prospect theory research led to the conclusion that findings are
consistent with a negative relationship between perceived risk
and making risky decisions". In fact, Sitkin and Weingart
(1995) recently found empirical support for the linkage which
we express in our ninth hypothesis (H9): Risk perception will
be negatively linked to risky decision making behavior.
METHOD
This
study was conducted as part of a larger project funded by the
Ohio Department of Mental Health (ODMH), Office of Program Evaluation
and Research (OPER) (grant # 91 - 1003) with the continuing support
of Michael Hogan, ODMH Director and Dee Roth, OPER Chief. Our
data were gathered as part of field study examining how Ohio's
53 local mental health authorities known as Community Mental Health
Boards (CMHB) were framing and responding to the implementation
of a major piece of legislation. The perceptual measures in our
model were assessed with a mail survey of 535 decision makers
in these CMHBs including paid staff (e.g., Executive Director)
and appointed members (e.g., Board President). The organization
(i.e., CMHB) was the referent for the inertia (single item), risk
perception (9 items) and problem framing (8 items) measures. Respondents
were conceptualized as key informants about these organization
level constructs (e.g., Rousseau, 1985). The individual respondent
was the referent for the 7-item risk propensity measure and scores
were averaged across respondents within CMHB to reflect the risk
propensity of TMTs (e.g, Hambrick & Mason, 1984).
Research
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