Phyllis C. Panzano, Psychology Department, The Ohio State University, 1827 Neil Avenue, Columbus, OH 43210
Robert S. Billings, Psychology Department, The Ohio State University

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.


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.


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.


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