Robustness of General Risk Propensity Scale in Cross-Cultural Settings

Abstract

Risk propensity, defined as an individual's current tendency to take or avoid risk (Pablo, 1997; Sitkin and Pablo, 1992; Sitkin and Weingart, 1995), has been an important concept in the management and business literature. Recent research has indicated that risk propensity plays an influencing role in various business decisions, behaviors, and outcomes. For example, in the entrepreneurship domain, risk propensity is found to be associated with entrepreneurial intentions (Zhao et al., 2010), social capital (De Carolis et al., 2009), and entrepreneurial status (Zhang and Arvey, 2009). In the information technology (IT) context, research indicates that risk propensity is associated with firms' IT investment decisions (Shim et al., 2009) as well as consumers' preference to use online service channel (Looney et al., 2008). In the area of human resource management, risk propensity is revealed as a key factor that shapes employee performance and turnover behaviors (Allen et al., 2007; Mukherji and Wright, 2002). It is also well documented in finance and investment literature that risk propensity influences investment choices and the expected returns (Kapteyn and Teppa, 2002). In addition, in a broader management literature, executives' risk propensity is linked with firms' strategic risk-taking (Devers et al., 2008; Martinez and Artz, 2006), market orientation (Jaworski and Kohli, 1993), corporate entrepreneurship (Ling et al., 2008), and ultimately firm performance (Saini and Martin, 2009). As risk propensity plays such a critical role in various decisions, scholars have taken important steps in developing scales to measure individuals' risk propensity in different contexts such as investment, financial decisions, marketing, and gambling (Jaworski and Kohli, 1993; Kapteyn and Teppa, 2002; Slovic, 1972; Weber et al., 2002). However, as Hung and Tangpong (2010) point out, business decisions in today's dynamic environment tend to be multifaceted, involving various aspects of risks concurrently. This multifaceted nature of business decisions makes risk propensity scales in the literature less applicable given the compartmentalized nature of these scales (i.e., for financial decisions, market orientation, social consideration, etc.). Therefore, Hung and Tangpong (2010) develop and propose a five-item general risk propensity scale (GRP scale hereafter) to measure an individual's propensity toward multiple types of risk typically faced by managers in multifaceted business decisionmaking. General risk propensity measured through the GRP scale is found to be significantly correlated with openness, ambiguity tolerance, and three specific types of risk propensity, namely financial, gambling, and social risk propensities. The GRP scale also achieves a reasonable degree of validity when used in explaining individuals' product innovation adoption decision. Despite these promising features, the GRP scale still has two obvious areas for further improvement. First, the GRP scale was initially developed using business students in a university in the United States and was then re-tested with MBA students with some business experiences from the early stage of their professional careers. The reliability of the GRP scale in measuring the general risk propensity of more established business professionals, who often face multifaceted business decisions, is therefore subject to question. Second, the GRP scale should also be validated in cross-cultural settings to assess whether it is still a reliable and valid scale when utilized in non-U.S, countries. The importance of cross-validating scales in different cultural contexts is well established in the international business literature (Douglas and Craig, 1983; Sekaran and Martin, 1982). Therefore, the primary purpose of this study is to improve the robustness of the GRP scale by (1) re-testing the scale with experienced U.S. business professionals who are established in their careers, (2) cross-validating the scale with Chinese business professionals, and (3) modifying the scale to improve its reliability and validity if necessary. …

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