Effects of organizational and decision-maker factors on new product risk taking

Using samples of evening MBA students having considerable managerial experience, two experiments were conducted, through which we explore the effects of organizational and decision-maker factors on managers' new product investment decisions. Subjects were asked to choose among new product development projects having equal investments and expected values but differing degrees of risk. Riskier projects were chosen by managers whose organizationally imposed goals were based on aspirational versus survival reference points, whose prior project decisions had resulted in the accumulation of additional financial resources, for whom prior project outcomes were attributed to the manager's guidance of the project versus competitive factors, and by managers whose propensities to take risks were higher. These results have important implications for the design and staffing of new product decision processes, for the creation of organizational cultures that foster new product risk taking, and for other organizational practices.