In this chapter, we explore social science theories that could explain how executives make decisions in contexts with a high degree of uncertainty. In particular we focus on how emerging young executives respond to risk in situations of uncertainty. First, we conduct a literature review followed by a critical analysis of socio-cultural decision-making literature. Then we performed a controlled experiment using a sample of senior university students to represent young executives. A context of uncertainty was designed which required the participants to work in small teams and make a decision based on incomplete and uncertain information about a managerial case study. In this way, we intended to illustrate what aspects of culture impacts decision making in a context of uncertainty.
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The world has changed so much since the 2007-2008 global fiscal crisis that we wonder how today’s university students will cope with complexity when they become our decision makers. According to Kotlyar et al. (2014), there is increasing research interest in decision making under uncertainty and risk by organizational managers and employees. Current executives will eventually retire leaving organizations to be managed by these emerging leaders. Will this new population of leaders be socialized with a risk-taking culture focused on free choice and flexibility or will they become socialized to govern through rules and military force? How will future decision makers react in complex situations? We explored these research questions by studying the impact of socialized culture on the decision0making behavior of future leaders while they are accessible to us in university as students.
Risk has several definitions, however, one of the most commonly referred definition is the one provided by Knight (1921) in which risk is described as a situation in which the individual opting for a choice knows both the potential outcomes of each choice and the probabilities that the choices will occur (Holmes et al., 2011). We recognized that there was a large body of knowledge about social culture and how those factors impact individual behavior (Bell, 2007; He & Freeman, 2010; Adekola & Sergi, 2007; Bevelander & Page, 2011; Caca, 2010; Chen, Sun, & McQueen, 2010; Cooper, Edgett, & Kleinschmidt, 2009; Fujita, 2002; G. J. Hofstede, 2009; Kirkman, Lowe, & Gibson, 2006; Michailova & Hutchings, 2006; Pheng & Yuquan, 2002; Siakas, Georgiadou, & Balstrup, 2010; Strang, 2012; Vajjhala & Strang, 2014). One of the most commonly used theories in decision making used by researchers to explain risk decision choice is the Prospect Theory developed by Kahneman and Tversky (1979) (Kotlyar, 2014; Holmes et al., 2011). Researchers have been focusing on exploring other motivational factors apart from these theories to explain decision making under risk and uncertainty.