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Risky Decision Making in Mixed-Gender Teams: Whose Risk Tolerance Matters? Leonard Karakowsky and A. R. Elangovan Small Group Research 2001; 32; 94 DOI: 10.1177/104649640103200105 The online version of this article can be found at: http://sgr.sagepub.com/cgi/content/abstract/32/1/94

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SMALL GROUP Karakowsky, Elangovan RESEARCH / RISKY / February DECISION 2001MAKING

RISKY DECISION MAKING IN MIXED-GENDER TEAMS Whose Risk Tolerance Matters? LEONARD KARAKOWSKY York University

A. R. ELANGOVAN University of Victoria

This study examined male and female decision making under risk and uncertainty at both the individual and the group levels. Participants included 163 undergraduate business students who responded to four business decision-making scenarios individually and in groups of varying gender composition. The results of this study raise a number of important issues regarding patterns of risk tolerance among male and female decision makers, both as sole decision makers and as members of decision-making teams in organizations.

Decision making in modern organizations is characterized, more than ever before, by elements of risk, uncertainty, and ambiguity. The rapidly changing national economic profiles and highly volatile global environment have turned the spotlight on critical issues surrounding risk, risk assessment, and risk tolerance in organizations, especially pertaining to decisions involving strategic direction, capital investments, new-product development, mergers and acquisitions, and so on. Consequently, there has been renewed research interest in decision making under risk and uncertainty by organizational managers and employees (Busenitz, 1999; Byrnes, 1998; Sitkin & Weingart, 1995). Research in this area has identified decision frame (Kahneman & Tversky, 1979), affect (E. Johnson & Tversky, 1984; Mittal & Ross, 1998), and mood (Isen & Patrick, 1983) among some of the key factors that affect perception of and attitudes toward risk. SMALL GROUP RESEARCH, Vol. 32 No. 1, February 2001 94-111 ÂŠ 2001 Sage Publications, Inc.

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In addition, the changing demographic structure of the workplace has highlighted the importance of considering and investigating the notion that different managers can possess different attitudes toward risk. The workforce is becoming increasingly diversified along dimensions such as race, ethnicity, age, and gender, which potentially presents a number of critical sources of differences in conceptions and attitudes toward risk. This underscores the need to consider the potential for diversity in conceptions and attitudes toward risk among managers or executive decision makers. Diversity in terms of gender is one area that demands further research attention, particularly in light of the drive toward a more balanced representation of men and women and the increasing desegregation of men and women in the workplace (Jackson, 1992). The increasing presence of work teams in organizations clearly demands increased attention to issues regarding the effective management of gender-mixed work groups and specifically a better understanding of gender dynamics in decision-making groups. The influence of group gender composition on the behavior of group members has been a topic of interest and controversy for many years. Much of this research has suggested that relative to men, women do not fare well in mixed-gender contexts. Specifically, among the findings, the research has indicated that women are more easily influenced and less influential than men (e.g., Eagly, 1983), men tend to have higher overall participation rates than women (e.g., Carli, 1982), and men tend to emerge as leaders in groups more often than women (cf. Dobbins, Long, Dedrick, & Clemons, 1990; Kent & Moss, 1994). In addition, consistent with Driskell, Olmstead, and Salasâ&#x20AC;&#x2122;s (1993) observation, there is much evidence in the literature to suggest that women are perceived as less competent and exert less authority in task groups compared to their male counterparts. Karakowsky and McBey (in press) suggested that it is these differences in perceived competence that can account for the behavioral deficits observed among women in mixed-gender settings. However, a question that remains largely unaddressed is, Given differential perceptions and behavior of men and women, how might decision-making patterns be influenced in such mixed-gender settings?

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With regard to decision making, although a number of studies have examined the issue of gender differences in individual decision making (e.g., Levin, Snyder, & Chapman, 1988) and group decision making (e.g., Kelly, Wildman, & Urey, 1982), the research has been sporadic at best. Research findings are even more sparse in the area of gender differences in organizational decision making, which can take the form of managers making the decision on their own (individual responsibility) or a corporate team or management group approach (group responsibility) (cf. J. Johnson & Powell, 1994). Of specific interest is the question, as of yet unanswered, How does risk tolerance among male and female group members affect team-level risk tolerance? Addressing this question requires a fuller understanding of potential differences in risky decision making among male and female managers as both lone decision makers and as members of corporate decision-making teams. This study takes the first step toward answering this question by exploring risky decision making at both the individual and the group levels. At the individual level, this research examines risk tolerance among men and women whose task it is to make a number of important business decisions. At the group level, this research considers the role of gender composition and specifically assesses whether the risk tolerance of a mixed-gender group is more likely to be influenced by male or female group members.

THEORETICAL BACKGROUND AND HYPOTHESES

Consistent with J. Johnson and Ansic’s (1997) observation, the literature has presented evidence that gender differences do exist with regard to risk preferences among decision makers. For example, Levin et al. (1988) examined the effects of gender on a simulated risky decision-making task and found that men responded more favorably than women to risk. The results of Levin et al.’s (1988) study suggested that women were more cautious in their decisions and less likely to take gambles compared to men. Zinkhan and Karande (1991) employed Kogan and Wallach’s (1964) instrument (Choice Dilemmas Questionnaire) for measuring risk-taking

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behavior and found that women tended to be more conservative than men when the former perceived the situation to be ambiguous and hence had to make decisions under uncertainty. Similarly, Hudgens and Fatkins (1985) used a computer-simulated task to investigate gender differences in risk taking and concluded that men are more inclined to take risks than women. Reviews of the literature have also confirmed a consistency in results that suggest men are more risk tolerant than women. For example, in a survey of 27 original investigations of gender differences in individual risk taking, 20 studies indicated greater risk taking for men, 3 indicated greater risk taking for women, 3 suggested conditional differences, and 1 indicated no gender difference (cf. Hudgens & Fatkins, 1985). A more recent meta-analysis conducted by Byrnes, Miller, and Schafer (1999) similarly indicated that men tend to exhibit greater risk tolerance than women over a variety of contexts. Although this finding suggests there may be underlying differences between men and women, understanding the causes of potential differences in risk taking is equally important (Byrnes et al., 1999); that is, why have many findings suggested that men are more risk tolerant than women? The topic of gender differences in risky decision making at both the individual and group levels has been insufficiently addressed by the research. Do men and women vary in their inherent preference for risk? Although there is no evidence to directly assert that risk preference is a trait and that there are biological differences, studies such as those cited earlier suggest that men in general appear to demonstrate tendencies to take greater risks than women. With regard to understanding why men and women might differ in risky decision making, it is useful to draw on the sociological literature and specifically the view of gender differences based on social role theory. The view that gender can influence behavior through socialized gender roles can be classified within the framework of the early socialization model (Maccoby & Jacklin, 1974). Eagleyâ&#x20AC;&#x2122;s (1987) gender-role perspective asserted that gender differences in social behavior originate from shared expectations or stereotypes about what is appropriate behavior for men and women. Essentially, this

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model asserts that men and women experience different socialization processes whereby each learns gender-appropriate patterns of behavior. Based on this view, through socialization at a young age, males are taught to be outgoing and achievement oriented, whereas females are taught to be emotionally oriented and reserved in their interactions with others (e.g., Fennell, Barchas, Cohen, McMahon, & Hildebrand, 1978; Marshall, 1984). Furthermore, girls are generally socialized to respect male power and authority and to refrain from expressions of aggressiveness or assertiveness (Greenspan, 1983). Boys, on the other hand, are typically socialized to be assertive and aggressive (Powell, 1988). The differences in gender role socialization between men and women can be considered as one key source of variation in risk tolerance. Risk taking can also be linked with the notions of aggressiveness and assertiveness in the context of managerial decisionmaking behavior. Extending this line of reasoning, risk tolerance can be seen as being influenced by confidence or efficacy (Bandura, 1986) that managers, both men and women, possess in the domain of executive decision making. In summary, the aforementioned research largely suggests a general pattern of conservative attitudes toward risk among women and more liberal attitudes toward risk among men. In other words, the general impression conveyed by the literature is that at an individual level, males, consistent with socialization into their gender role, tend to accept riskier decisions than females. Hypothesis 1: Male decision makers are more tolerant toward risk than female decision makers.

Aside from predictions of gender differences in risk tolerance among individuals, a critical yet largely ignored question is, What happens when men and women jointly make decisions? Obviously, executive decisions can be made alone or as members of a team. Whose risk preferences dominate team decision making in mixedgender contexts? It is not clear what would happen in a mixed-gender group, that is, which way would the pendulum swing? How would

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individual attitudes toward risk among men and women as individual decision makers translate into group decisions in the mixed-gender context? Do men or do women have more effect on the ultimate level of risk tolerance accepted in group decisions? Although there is a paucity of prior research directly on this topic, theoretical developments in the area of group dynamics and gender issues offer a conceptual basis for exploring this issue. Group polarization theory offers one theoretical avenue for exploring the gender dynamics of risky decision making in mixedgender groups. Group polarization (Myers & Lamm, 1976) postulates that the initial preference held by the majority of the individual members at the beginning of a discussion will increase as the discussion progresses. How, then, will group polarization processes operate given a mixed-gender composition of a work group? In a mixed-gender group, the relative status among group members can have important implications for patterns of risk tolerance adopted by the group. Expectation-states theory (EST) or statuscharacteristics theory (Berger, Cohen, & Zelditch, 1972; Berger, Rosenholtz, & Zelditch, 1980) suggest that it is perceived status or expertise of men and women that will have the greatest effect on behavior in a mixed-gender work group. According to EST, gender acts as a status cue that provides a basis for beliefs about one’s competence across a wide range of situations (Berger et al., 1972; Berger, Fisek, Norman, & Zelditch, 1977; Berger et al., 1980; Eagly, 1983; Eagly & Wood, 1982, 1991; Meeker & Weitzel-O’Neill, 1977). Based on this view, men in a mixed-gender group are perceived as relatively more competent than their female counterparts. This is a consequence of the general perception of men as associated with higher status roles in society (Meeker & Weitzel-O’Neill, 1977; Wood & Karten, 1986). Differences in status will result in differential distributions of power and prestige in a group, which is reflected through observable differences in participation and influence among group members (Berger et al., 1972; Berger, Conner, & Fisek, 1974). In fact, the research that has been informed by social role and expectationstates theory has often concluded that males will outperform females

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with regard to participation and leadership behavior (Karakowsky & Siegel, 1999; Kent & Moss, 1994) in a mixed-gender group given the nature of gender roles (Eagly, 1987) and the differential social status of men and women (Eagly & Carli, 1981; Wood & Karten, 1986). These findings offer important implications for predicting the relative effect of the risk tolerance of individual group members for the group-level risk tolerance in a mixed-gender setting. Specifically, the research cited earlier suggests that male group members will exert stronger influence on the risk tolerance adopted by a mixedgender decision-making team. This suggests that in a mixed-gender group of decision makers, men will tend to largely determine the group’s tolerance toward risk. Hypothesis 2: In mixed-gender decision-making groups, the group’s level of risk tolerance will more closely reflect the level of risk tolerance exhibited by the male as opposed to the female group members.

METHOD PARTICIPANTS

This study employed a sample of 163 university students enrolled in an undergraduate business program (113 women and 50 men). Participants were randomly assigned to 28 groups of varying sizes and gender composition. See Table 1 for a tally on the distribution of groups with gender composition and group size. PROCEDURES

All participants individually completed their responses to four decision-making scenarios (see the appendix for a sample scenario). The cases reflected real managerial decisions with regard to issues such as deciding on building a manufacturing plant overseas, investing in new-product development, and investing in a plant in a foreign subsidiary. After completing their responses, participants

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TABLE 1: Distribution of Groups of Participants by Composition and Size Number of Participants in Group Gender Composition of Group Male dominated Gender balanced Female dominated

2 — 3

2 5 18

1 — 7

0 1 0

were assigned to groups and required to complete one group response for each scenario through group consensus. Both responses (individual group member and overall group response) were submitted to the research assistant. Next, participants completed a questionnaire that assessed demographic information as well as measures of individual characteristics (described next). MEASURES

Our central interest in this study was to assess the influence of member gender on individual and group levels of risk tolerance in responses to the four decision-making scenarios. The measures of these two variables of central interest, individual risk tolerance and group risk tolerance, are described as follows. Individual risk tolerance (IRT). The participants’ individual responses to Cases A through D formed the raw data indicating individual risk tolerances. However, what was needed was a continuous measure that would constitute the participant’s risk tolerance. Based on these raw scores, we used the Optimal Scaling Procedure to derive a single common scale score to represent individual risk tolerance. This derivation rests on the statistical assumption that individual risk tolerance is a one-dimensional, interval scale, continuum in the population and that the subpopulation of measurable risk tolerance scores corresponding to each true risk tolerance score is normally distributed. The IRT score was obtained by generating the square of the common scale score, after a shift by 3.5 to remove negative values from the data.

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Group risk tolerance (GRT). The group’s consensus responses to Cases A through D formed the raw data indicating group risk tolerance. Based on these raw scores, we again used the Optimal Scaling Procedure to derive a single common scale score to represent group risk tolerance. This derivation similarly assumed that group risk tolerance is a one-dimensional, interval scale, continuum in the population and that the subpopulation of measurable risk tolerance scores corresponding to each true risk tolerance score is normally distributed. We obtained the GRT score as the square of the common scale score, after a shift by 3.3 to remove negative values from the data. Efficacy in task completion (ETC). Given previous research suggesting that personality variables can influence risk tolerance, we obtained measures of self-efficacy with regard to accomplishing the tasks or goals (Whyte, Saks, & Hook, 1989). We used a 17-item 5-point Likert-type scale instrument (Sherer et al., 1982) to obtain a measure of participants’ self-perceptions of their ability to complete the task. The ETC score was the average of the responses to all 17 items (with responses scored in the direction that low scores represented high levels of efficacy). The estimate of internal consistency for this instrument as measured by Cronbach’s alpha was .91.

RESULTS AND DISCUSSION

The hypothesized relationships between risk tolerance and both gender and efficacy in task completion were tested using hierarchical regression analyses. The age of the individual was entered as a control variable by including a transformed value of age in the initial block of the hierarchy. Age was transformed by taking its reciprocal and therefore higher values refer to lower ages. GENDER AND INDIVIDUAL RISK TOLERANCE

To ensure that the individual risk tolerance measure developed using the raw data of the participants’ responses to the four scenar-

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TABLE 2: Summary of Hierarchical Regression Analysis for Variables Predicting Individual Risk Tolerance (N = 155) Variable Step 1 Inverse age Step 2 Inverse age Gender Efficacy in task completion score 2

SE B

94.19

60.85

.12

107.28 2.45 1.51

59.22 1.05 0.64

.14 .18* .18*

NOTE: R = .02 for Step 1 (ns); ∆R = .07 for Step 2 (p < .01). *p < .05.

ios does in fact reflect their risk tolerance, we examined IRT’s relationship with participants’ scenario responses. The correlation analyses showed support for the validity of the IRT measure for all four scenarios: Case A, r(161) = .771, p < .01; Case B, r(159) = .637, p < .01; Case C, r(160) = .742, p < .01; and Case D, r(159) = .515, p < .01. The IRT scores were also approximately normally distributed, as indicated by a Kolmogorov-Smirnov test, D(161) = .05, p > .20. Both the individual’s gender and the individual’s ETC score were linearly related to the individual’s risk tolerance as measured by the IRT score (see Table 2). The positive coefficient for gender in the second step in Table 2 indicates that even after controlling for the effects of age and efficacy in task completion (as measured by the ETC score), men have a higher mean risk tolerance than women. Furthermore, the positive coefficient of the individual’s efficacy in task completion (ETC score) in the second step in Table 2 indicates that higher levels of efficacy in task completion are also associated with higher levels of individual risk tolerance. However, it should be noted that there was no evidence that men’s mean ETC score (M = 3.55, SD = .81) was statistically significantly different from that of women (M = 3.40, SD = .73). Thus, both gender differences and ETC make unique contributions to explaining risk tolerance of individuals. GENDER AND GROUP RISK TOLERANCE

The influence of group gender composition was accounted for in the regression analysis of group risk tolerance by using as predic-

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TABLE 3: Summary of Hierarchical Regression Analysis for Variables Predicting Group Risk Tolerance (N = 38) B

SE B

.16 .26

.05 .06

.47** .64**

.14 .34 .01 –.46

.07 .12 .34 .51

.42 .85** .01 –.27

Variable Step 1 Women’s total individual risk tolerance Men’s total individual risk tolerance Step 2 Women’s total individual risk tolerance Men’s total individual risk tolerance Women’s total efficacy in task completion score Men’s total efficacy in task completion score

NOTE: R2 = .33 for Step 1 (p < .01); ∆R2 = .02 for Step 2 (ns). **p < .01.

tors the total individual IRT and ETC scores of male and of female group members. The GRT scores retained linear relationships with the risk tolerances displayed by the groups in their responses to Case A, r(37) = .779, p < .01; Case C, r(37) = .679, p < .01; and Case D, r(37) = .439, p < .01. (However, for Case B, groups’ risk tolerance responses were insignificantly although negatively correlated with their responses to all the other cases and to the GRT score.) The IRT scores were approximately normally distributed, as indicated by a Shapiro-Wilk test, W = .96, p > .2. Although it appears in Step 1 of Table 3 that both total female and total male IRT have significant associations with group risk tolerance, Step 2 indicates that only total male risk tolerance is associated with group risk tolerance. The positive coefficient of total male risk tolerance indicates that higher levels of total male risk tolerance are associated with higher levels of group risk tolerance. This suggests the presence of a male bias in group settings with regard to the ultimate risk preferences accepted by a decision-making group. There appears to be no relationship between efficacy in task completion and risk tolerance at the group level.

CONCLUSIONS

It is important to note that risk tolerance or intolerance is neither inherently good nor bad, what is critical is the awareness of factors

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that influence risk tolerance, particularly where male and female executives are subjected to differential sources of influence. Facilitating effective individual and group decision-making processes requires a clearer understanding of factors that influence the decision process. That numerous executive decisions occur within the context of risk and uncertainty underscores the importance of examining those factors that can affect attitudes toward risk at the group level. This study examined gender differences in individual decision making under risk and uncertainty and also considered the impact of these differences on risk tolerance at the group level. The results indicate that consistent with previous findings, men tend to be greater risk takers compared to women. However, what is of particular interest in this study was the finding that it is the male rather than female tolerance toward risk that is more influential in determining the ultimate risk tolerance within a mixed-gender decisionmaking group. Obviously there are a number of important and somewhat troubling implications of this finding. Why was the risk preference adopted by the group more reflective of male group members rather than the female group members? Did members assign greater weight to male risk preferences compared to female risk preferences? Clearly, future research needs to examine the underlying process of risk preference generation in mixed-gender decision-making teams. One area that begs further exploration with regard to the underlying process of risk preference generation in groups is the perception of relative expertise among men and women in decision-making groups. That is, might male group members have had more influence on the ultimate risk preference of the group by simple virtue of their gender? Our finding raises important implications for the recognition of member expertise and influence in group decision-making tasks and the perceived comfort level that members have in communicating their risk preferences. The recognition of expertise in a work group is important for effective decision making (Libby, Trotman, & Zimmer, 1987; Littlepage, Whisler, Schmidt, & Frost, 1991). The results of Littlepage et al.â&#x20AC;&#x2122;s (1991) study indicated that group performance was related

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to both the amount of expertise and the ability to recognize individual group members’ expertise. Clearly, a group composed of members who possess the relevant task expertise will nonetheless fail to maximize the group’s potential decision-making effectiveness if these members fail to exert influence in the group. In this regard, future research should examine perceptions of expert power (French & Raven, 1959) and its influence on risky decision making adopted by the group and ultimate performance of the group. This study contributes to an understanding of the dynamics of mixed-gender groups by addressing a number of important questions regarding the relative role of gender in risky decision making at both the individual and group levels. However, there are a number of limitations regarding our research design as well as a number of questions that remained unanswered by our study. First, our study examined behavior within groups that had very short-term life spans. Perceptions of expertise can vary as group members become more familiar with the abilities of their coworkers. According to expectation-states theory, direct information about competence has a greater effect on expectations and behavior than inferences about competence based on diffuse status characteristics (Berger et al., 1972). This study did not provide the opportunity to develop such an understanding given its short-term duration. The effects of the factors examined in our study might be reversed over time—with experience, group members may base perceptions of relative expertise on more direct cues rather than relying on gender as a source of information. This may have important implications for members’ tendencies to engage in risky decision making. In addition, future research should explore the effects of the type of decision rule employed by the group to reach their decisions. The groups in our study were required to reach a consensus on the decision task. Another issue of generalizability arises from the nature of the sample chosen. This study employed university students, most of whom had little full-time work experience. The question arises: Would gender have played as important a role if decisions were made within organizational roles in real-world functioning work teams? Research elsewhere has cautioned that the nature of the group’s task could influence perceptions of expertise (Karakowsky &

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Siegel, 1999). This also raises the following question: How might group gender composition along with the gender orientation of the task influence the risk tolerance at the individual and group levels? For example, whereas much of the previous research indicates higher risk tolerance among males, a number of these studies included tasks or subject matter with a strong pro-male bias such as gambling (Levin et al., 1988), war games (Hudgens & Fatkins, 1985), and driving (Jamieson, 1977). Furthermore, there have been several nonsignificant and contradictory findings that suggest a need for caution in interpreting these results. Perhaps the managerial cases employed in our study were inherently male biased, given the traditional association of management, professional roles, and leadership with men (Vancouver & Ilgen, 1989). Future research should more fully consider what tasks tend to be gendered and the impact of this gendering on risky decision making among men and women and mixed-gender teams. To obtain a more comprehensive and detailed picture, a research program is needed for exploring the processes, interactions, and patterns implied in the findings outlined earlier. One potential venue for research meriting consideration involves integrating the leadership and decision-making literature to consider the effects of the emergent leader’s gender and the gender composition of the group on risk-taking behavior. It would be interesting to examine the interaction of leadership and the decision-making process and their effect on risky-choice behavior in groups of varying gender composition. In sum, future research should more fully examine the sources for differences in risk tolerance at both the individual and group levels in mixed-gender settings. Given the increasing presence of women in positions of decision-making authority as well as the urgent need to better integrate men and women into work teams, it is critical to examine those factors that can encourage differing attitudes toward risk among male and female executive decision makers and whether each gender’s risk preferences are given equal consideration in a decision-making team’s final judgments. It is our hope that this article will ignite both interest and curiosity and

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encourage further progress in examining this and other important issues regarding male and female decision making.

APPENDIX SAMPLE CASE SCENARIO You are the president of a light metals corporation. The corporation is quite prosperous, and you are seriously considering the possibilities of business expansion by building an additional plant in a new location. The choice is between building another plant locally, where there would be a moderate return on the initial investment, or building a plant in a foreign country. Lower labor costs and easy access to raw materials in that foreign country would mean a much higher return on the initial investment. On the other hand, there is a history of political instability and turmoil in the foreign country under consideration, which makes it a riskier option than building a plant locally. Listed below are several probabilities or odds of continued political stability in the foreign country under consideration. Please check the lowest probability that you would consider acceptable for building a plant in that foreign country. The chances are 1 in 10 that the foreign country will remain politically stable. The chances are 3 in 10 that the foreign country will remain politically stable. The chances are 5 in 10 that the foreign country will remain politically stable. The chances are 7 in 10 that the foreign country will remain politically stable. The chances are 9 in 10 that the foreign country will remain politically stable. Place a check here if you recommend not building a plant in the foreign country no matter what the probabilities of political stability are.

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Leonard Karakowsky is an assistant professor in the School of Administrative Studies at York University. He received his Ph.D. from the University of Toronto. His current research interests include leadership behavior in work teams, the influence of demographic diversity on intragroup behavior, and causal attributions in culturally diverse work contexts. A. R. Elangovan (Elango) is an associate professor in the Faculty of Business at the University of Victoria. He received his Ph.D. from the University of Toronto. His current research interests include managerial dispute resolution, trust in organizations, cross-cultural issues in conflict management, decision making, and the application of artificial intelligence to human resource management.