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Risk and procedural rationality: a behavioral theory perspective

Todd M. Alessandri (School of Business, Providence College, Providence, Rhode Island, USA)

Journal of Strategy and Management

ISSN: 1755-425X

Article publication date: 21 November 2008

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Abstract

Purpose

The purpose of this paper is to explore the impact of perceived risk on the procedural rationality of the decision process rather than decision choices or outcomes. The moderating roles of attainment discrepancy and organizational slack are also explored.

Design/methodology/approach

These relationships, motivated by behavioral theory, are tested using survey data of capital investment decisions in a sample of 128 public firms in the USA.

Findings

The findings suggest an inverted‐U shaped relationship between perceived risk and procedural rationality. In addition, absorbed slack and attainment discrepancy played moderating roles on the perceived risk‐procedural rationality relationship.

Research limitations/implications

This study has several implications for research. First, the influence of risk is extended beyond decision outcomes to include decision processes. Second, the core arguments of behavioral theory, including uncertainty avoidance and decision context, appear to hold for the decision process. However, the effects of risk appear to be in the form of an inverted U‐shaped relationship, differing from prior behavioral theory research related to decision outcomes.

Practical implications

Perceived risk and the organizational context can lead to differing approaches to making decisions. As perceived risk increases, managers appear to alter the extent of information gathering and analysis. Organizations may consider designing different decision processes for different situations that take these managerial tendencies into account.

Originality/value

The contribution of this study is the extension of behavioral theory explanations of risk from decision choices or outcomes to the procedural rationality of the decision process. The findings show that risk has a non‐linear influence on the procedural rationality of the decision process.

Keywords

Citation

Alessandri, T.M. (2008), "Risk and procedural rationality: a behavioral theory perspective", Journal of Strategy and Management, Vol. 1 No. 2, pp. 198-217. https://doi.org/10.1108/17554250810926375

Publisher

:

Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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