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.


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).

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