Risk and rationality: the influence of decision domain and perceived outcome control on managers' high‐risk decisions

The issue of when managers will undertake different forms and amounts of risk in their new business creation decisions is still not fully understood. To address one facet of this issue, this paper advances the proposition that decision domain and perceived outcome control interact to impact managers' new-product introduction decisions. Employing a causal method, a nested experimental design and indicators of risk's probability of loss and magnitude of loss elements, the study's results demonstrate that the manager's level of perceived outcome control combines with decision domain to determine subsequent levels of risk taking that are specific to each element of risk. Implications for theory, including prospect theory, and practice, especially firms wanting to pursue today's high-risk new-economy based initiatives, are discussed. Copyright © 2002 John Wiley & Sons, Ltd.

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