The Effect of National Context on Perceptions of Risk: A Comparison of Planned Versus Free-Market Managers

Mona V Makhija and Alice C Stewart
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Mona V Makhija: The Ohio State University
Alice C Stewart: Guilford College

Journal of International Business Studies, 2002, vol. 33, issue 4, 737-756

Abstract: A model is developed to explain the effect of national context on risk-related decisions. An essential feature of risk-related decisions is substantial uncertainty, or inadequate information, as well as significant consequences regarding future outcomes. We argue that differences in information flows and consequences across national institutional environments affect the perceived uncertainty of decision situations. For this reason, the institutional environment in which managers reside should play a fundamental and systematic role in influencing their perceptions of risk. We test our model on managers from two environments that contrast in terms of information and consequences related to risk, a free-market economy (the U.S.) and a centrally planned economy (the Czech Republic in 1992). Our results indicate that the institutional environment does indeed play a strong and systematic role in explaining managers' risk-related decisions. Thus, national environment appears to be an important contextual condition to which the propensity to take risks is sensitive.© 2002 JIBS. Journal of International Business Studies (2002) 33, 737–756

Date: 2002
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