The Risk of Caution: Evidence from an Experiment

• 成果类型: Article
• 署名作者: Carson, Richard T.; Zivin, Joshua Graff; Louviere, Jordan J.; Sadoff, Sally; Shrader, Jeffrey G.
• 署名单位: University of California System; University of California San Diego; University of California System; University of California San Diego; University of South Australia; University of California System; University of California San Diego; Columbia University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4292
• 发表日期: 2022
• 页码: 9042-9060
• 关键词: Research and development; INNOVATION; Decision Analysis; RISK; organizational studies; motivation incentives; finance; INVESTMENT

摘要

Innovation is important for firm performance and broader economic growth. However, breakthrough innovations necessarily require greater risk taking than more incremental approaches. To understand how managers respond to uncertainty when making research and development decisions, we conducted experiments with master's degree students in a program focused on the intersection of business and technology. Study participants were asked to choose whether to fund hypothetical research projects using a process that mirrors real-world research and development funding decisions. The experiments provided financial rewards that disproportionately encouraged the choice of higher-risk projects. Despite these incentives, most participants chose lower-risk projects at the expense of projects more likely to generate a large payoff. Heterogeneity analysis and additional experimental treatments show that individual risk preferences predict greater tolerance of high risk projects and suggest that more appropriate decision making can be learned. Thus, for firms seeking to fund breakthrough research and development, appropriate screening and training of employees may play important roles in increasing the likelihood of success.