Business Risky Decision-Making And Framing Effect Mechanism Model Research

Uncertainty and risk are the critical characteristics of business management decision-making. It has important implications to study how managers deal with business risks and make decisions. The research on relations between the task characteristics, the cognitive factors and the risky decision behaviors can increase the effectiveness and reduce cognitive bias of decision making.Using the managerial psychology approach, this study focused on the effects of framing, distributed processing, risk perception and alternative evaluation on the risky decision-making behavior. The information processing mechanism behind the framing effect was also explored. The relationship among risk-taking, actions after choice and decision effectiveness was discussed in the application perspective. This study includes three parts as follows:In the first part of research, using field interviews and questionnaire surveys, the concept of risk in Chinese culture was analyzed. We identified the experimental task of risk decision-making, and some critical incidents of business risky decision making were collected as well. The results showed: (1) The conception of risk was in a single dimension. Risks were considered as the possibility of lost. It shows that the concept of risk was close to the risk perception in Chinese culture. (2) The critical incidents in business risk decision making include: diversification decisions, credit sale - market exploring dilemmas, market transform decision, overstock management and company merger decision, etc.The second part of the research focused on dynamic process of risky decision. Using structural interviews and case study, the results showed: (1) In the successful cases, the way managers dealing with risks was not simply avoiding risks or taking risks, but risk management. It was an active way to manage risks according problems and other factors. (2) A key factor that affects the decision making is the ability to risk perception. One important reason of unreasoning risk-taking behavior is that the decision makers have not percept the risk of decision, which was called unconscious risk taking. Unconscious risk taking decreased the decision-maker's alert level and caused the problem.From the information processing perspective, some hypotheses were given to confirm our model. They are as the following: (1) The prospect frame and theattribute frame had effects on the decision maker's distributed processing and then risk- taking behavior. (2) The framing effect was affected by the characteristics of the problem, especially the strategy and survival.The third part explored the mechanism of framing effect in business decisions, focusing on the effects of strategy on framing effects, the relationship between prospect framing and attribute framing, and the functioning mechanism of information processing process in framing effects. This was the main part of the study and included two subparts with three experiments. Two hundred and sixty seven managers across all levels organizations and one hundred and seventy five college students were involved as subjects. The results showed that: (1) Framing effect was significant on non-strategic risky decisions tasks, while not on strategic risky decisions. The context of strategic decision tasks and particularly the great influence of the decisions on organizational development, led to the fact that decision makers are rationally oriented and inclined to risk aversion. In comparison to organizational contextual factors, framing had relatively weak influence on risk-taking behavior. (2) The effects of attribute framing were more significant than that of prospect framing. (3) The prospect framing affected distributed processing of decision makers. The cognitive processing mechanism of prospect framing effect was revealed in the fact that prospect framing caused change of distributed processing to the information in option. This study attempted to explore the mechanism of framing effects in terms of the information processing.Based on the findings above, information processing mechanism model of framing effect was discussed. The Background theory was proposed in the perspective of distributed processing, with the attempt to explain information processing process mechanism of framing effect in a new way.