Regulatory Focus on Risky Decision-Making.

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APPLIED PSYCHOLOGY: AN INTERNATIONAL REVIEW, 2008, 57(2), 335359

doi: 10.1111/j.1464-0597.2007.00319.x

Blackwell Publishing LtdOxford, UKAPPSApplied Psychology0269-994X International Association for Applied Psychology, 2008XXXOriginal ArticlesRISKY DECISION-MAKINGBRYANT AND DUNFORD

The Influence of Regulatory Focus on Risky

Decision-Making

Peter Bryant* and Richard Dunford

Macquarie Graduate School of Management, Macquarie University,

Sydney, Australia

Although studies show that regulatory focus influences decision making andrisk taking, theories of risky decision making typically conflate differentregulatory orientations and the related distinctions between the positive andnegative risks associated with acts of omission and commission. In contrast,we argue that different regulatory orientations influence risk perception andrisk propensity in different ways and underpin complex emotional responsesin risky decision making. We propose a new model of these processes andsuggest that regulatory focus may be important in priming and managing risktaking behavior. We conclude by discussing implications for research andpractice.

Bien que des recherches montrent que le centre de rgulation influence la prisede dcision et la prise de risque, les thories de la prise dcision risqueregroupent habituellement diffrentes formes de rgulation et les distinctionsconnexes entre les risques positifs et ngatifs associs au passage lacte ounon. Contrairement ces thories, nous avanons que les diffrentes formesde rgulation influencent la perception et la propension au risque selon dif-frentes modalits et sous-tendent les rponses motionnelles complexes dansla prise de dcision risque. Nous proposons un nouveau modle de ces pro-cessus et suggrons que le centre de rgulation peut tre important danslamorce et la gestion du comportement de prise de risque. Nous concluons endiscutant des implications de ces rsultats pour la recherche et la pratique.

INTRODUCTION

In classically inspired studies of decision-making, risk is related to Bayesian

ideals of probability and expected utility (March & Shapira, 1987; Simon,

1979). In such a world, people have sufficient information and cognitive

* Address for correspondence: Peter Bryant, Macquarie Graduate School of Management,

Macquarie University, Sydney NSW 2109, Australia. Email: [email protected]


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capacity to arrive at fully objective measures of risk and then make

decisions to maximise utility (Kahneman & Tversky, 1979). However, in

more recent times, concepts of limited information, bounded rationality,

and the acknowledgement of psychosocial factors have redrawn the map of

risk research (Camerer & Loewenstein, 2004; Schwartz, 2002). Scholars now

incorporate psychological and sociological factors into models of risky

decision-making (Slovic, 2000a). This perspective has prompted Richard

Thaler (2000, p. 140) to predict that Homo Economicus will evolve into

Homo Sapiens, noting that economic behavior and decision-making

involve a wide range of human characteristics, not simply the pursuit of

utility maximisation. Researchers have thus uncovered more of the internal

complexities associated with risk-taking. It is no longer seen as a single

unitary process, where people make objective assessments of probabilities

based on complete information. Rather, people possess general propensities

to accept or avoid risks, perceive and assess risks based on subjective

criteria, make idiosyncratic trade-offs between risk and reward in decision-

making (Bazerman, 2001), and consistently employ decision heuristics

defined as cognitive short-cuts (Camerer & Loewenstein, 2004). Behavioral

approaches to the study of decision-making thus incorporate psychosocial

factors into the analysis of risk.

Among the important psychosocial antecedents of risk-taking are the

dispositions and biases of the individual decision-maker, the characteristics

of the organisational context, and the nature of the decision problem itself

(Beach & Connolly, 2005). However, it is virtually impossible to explore all

such factors simultaneously. Rather, recent research focuses on hitherto

unexplored social and psychological factors in order to uncover their role in

risk-taking. Working in this vein, scholars have identified additional

antecedents of risky decision-making, for example, the influence of interpersonal

relationship trust (Das & Teng, 2004), the escalation of commitment

(Wong, 2005), the psychological factors which influence heuristic bias

(Gilovich & Griffin, 2002), and the influence of affect on risk perception

and risk propensity in complex strategic decision-making situations (Mittal

& Ross, 1998).

Scholars recommend further research on related factors including social

cognitive self-regulation (Higgins, 2002; Mischel & Shoda, 1998; Sitkin &

Weingart, 1995), which is the focus of this paper. Self-regulation is an

important topic in the study of social cognition, which is distinguished from

non-social cognition by its focus on the interaction between social and

cognitive variables (Higgins, 2000b). Social cognition underlies learning

about what matters in the social world and thereby provides essential

aspects of what it means to be human In this context self-regulation is


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of those goals (Boekaerts, Maes, & Karoly, 2005). Self-regulation also

includes regulatory focus, which refers to the fundamental concerns that

guide self-regulation and underpin motivation systems (Higgins, 2002).

Regulatory focus influences goal-directed thought and behavior, and is

expressed as either a promotion focus on attaining gains, or a prevention

focus on avoiding losses. Studies already demonstrate the impact of

regulatory focus on risky decision-making (Higgins, 2002), risky information

processing style (Frster, Higgins, & Bianco, 2003), outcome categorisation

under conditions of uncertainty (Molden & Higgins, 2004) and probability

weighting bias (Kluger, Stephan, Ganzach, & Hershkovitz, 2004). This

paper probes these phenomena more deeply.

The rest of the paper proceeds as follows. The next section presents a

brief review of theories about risky decision-making, self-regulation and

regulatory focus theory. This is followed by the development of a set of

propositions that identify the role of regulatory focus in risky decision-

making. In particular, the paper argues that regulatory focus influences the

effect of outcome history on risk propensity and influences the effect of

problem framing on risk perception (see Baron & Kenny, 1986; Sitkin &

Pablo, 1992). The paper also argues that regulatory focus underpins

emotional responses in risky decision-making (see Higgins, Grant, & Shah,

1999; Liberman, Idson, & Higgins, 2005). It concludes by discussing the

implications for future research and practice.

THEORETICAL BACKGROUND

Theories of Risk

From a behavioral perspective, risk has been defined as the extent to which

there is uncertainty about whether potentially significant and/or disappointing

outcomes of decisions will be realized (Sitkin & Pablo, 1992, p. 10). This

reference to uncertainty and disappointment highlights the psychosocial

factors involved in the behavioral conception of risk. In this conception, risk

is a socially constructed estimation of probability, rather than an objective

reality of the world (Slovic, 2000b). Decisions are riskier if the expected

outcomes are seen as more uncertain, the desired goals as more difficult to

achieve, or the potential outcomes include extreme consequences (Sitkin &

Pablo, 1992). This approach is consistent with the assumed relevance of

social cognitive factors such as regulatory focus in risk-taking. In this paper,

we adopt the same approach and define risk as the socially constructedestimation of the chance of some occurrence or outcome.

A similar conception of risk underpins the identification of the individual


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with classes of problem situations act as determinants of risky decision-

making. Indeed, when decision-makers are more experienced, they may

begin to focus selectively on the evidence of their past ability to overcome

obstacles, and therefore may be willing to accept risks that less experienced

individuals would avoid (e.g. March, 1997). Escalation of commitment is

also consistent with the notion that individual experiences foster increasingly

risky behavior over time (Geiger, Robertson, & Irwin, 1998; Wong, 2005).

Situational factors have been also observed in relation to different aspects

of managerial risk-taking (Krueger & Dickson, 1994; Pablo, Sitkin, &

Jemison, 1996). In summary, a persons situation and accumulated

experiences have a significant influence on risk-taking.

These factors are related to risk perception and risk propensity as

psychosocial dimensions of risk-taking. Risk propensity is defined as the

willingness to take risks, while risk perception is defined as the assessment

of the risk inherent in a situation (Sitkin & Pablo, 1992). These factors are

prominent in behavioral theories of risk that recognise the influence of

organisational context, the problem situation, and an individuals psychological

and social characteristics. Most notably, Sitkin and Pablo (1992) propose a

mediated model of risk-taking, theorising that the effects of a number of

previously examined variables on risk-taking are not direct, but instead are

mediated by risk propensity and risk perception. They argue that the effects

of problem framing and outcome history on risk-taking are mediated by

risk perception and risk propensity, respectively. These relationships had

been overlooked and confounded in prior studies. Subsequent empirical studies

provide supporting evidence for these claims (Sitkin & Weingart, 1995).

These findings have major implications for practice. First, they suggest

that risk-taking is more malleable early in a decision-makers domain career

when he or she has little experience in a particular risk domain. Then, as

domain experience increases over time, risk propensity will tend to become

more stable, supporting the point made by socialisation theorists about the

relative malleability of inexperienced versus experienced actors (March,

1997). This finding is supported by those who question the validity of

investigating risk devoid of situational context in hypothetical situations

(Kuhberger, Schulte-Mecklenbeck, & Perner, 2002). Second, individual or

group decision makers can be purposively selected on the basis of their

outcome histories and risk propensity to influence the likelihood that more

or less risky decisions will be made (Sitkin & Weingart, 1995, p. 1589). This

contradicts the view that risk perception and propensity are stable traits.

Regarding risk perception, Kahneman and Tversky (1979) established the

importance of problem framing as a situationally conditioned variable. In a

series of seminal studies they show that how a particular risk is framed has


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further examined, it is unclear how problem framing affects decision-

making in actual contexts (Sitkin & Weingart, 1995). It is especially important

to identify if a problem is framed as a positive risk or as a negative risk. In

that regard, Sitkin and Weingart (1995) argue that downside risks become

more salient in positively framed situations (inducing risk-avoidance behavior),

whereas upside risks become more salient in negatively framed situations

(inducing risk-seeking behavior). Building on these insights, Mittal and

Ross (1998) further show that positive affect is associated with positive risk

framing, while negative affect is associated with negative risk framing.

Collectively, these findings imply that the way in which problem situations

are framed will have a significant impact on how risks are perceived and felt.

Similar issues arise in relation to the determinants of risk propensity.

Most earlier studies focus on either individual risk orientation as a personality

variable or on objective assessments of risk, and largely ignore the role of a

persons previous risk outcome history and situational context (e.g. Kahneman

& Tversky, 1979). Sitkin and Weingart (1995) challenge this a-historical

approach, and their studies confirm that prior success in taking risks within

a particular problem domain can increase the propensity to take future risks

in that domain (cf. Krueger & Dickson, 1994). Consequently, they argue

that experiential factors must be included in any analysis of risk propensity

(cf. Sitkin & Weingart, 1995). These findings contradict the view that risk

propensity is a stable personality trait and suggests that a persons willingness

to take risks is significantly dependent on their prior experience of risk-

taking. These findings also counter the persistent bias of many studies,

which tend to sanitise decision-making and risk-taking in terms of idealised

standards of rationality and overly simplified hypothetical problem

scenarios (Bazerman, 2001; Kuhberger et al., 2002; McNamara & Bromiley,

1997). Rather, they suggest that the determinants of social cognition, such

as historical, situational, and organisational factors, may be important in

priming and contextualising risk propensity and risk-taking behaviors

(Bandura & Locke, 2003; Mischel & Shoda, 1995). Self-regulation is one

such factor.

Theories of Self-Regulation

In a world where organisational boundaries and networks are becoming

more dynamic, distributed, and societal, social cognitive self-regulation is

increasingly relevant for management studies (Brotherton, 1999; Wood,

2005). Interest in these topics has also been driven by widespread practical

changes in organisational behavior, where individual initiative, teamwork,

and leadership have prompted greater attention towards goal directed


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primary motivation is promotional (to advance and create), or preventative (to

protect and avoid) (Higgins, Friedman, Harlow, Idson, Ayduk, & Taylor, 2001).

Regulatory focus occurs as both a chronic individual variable and a

situational variable (Shah, Higgins, & Friedman, 1998; Van-Dijk & Kluger,

2004). The chronic form largely derives from a persons developmental and

achievement history (Higgins et al., 2001; Higgins & Silberman, 1998).

Importantly, chronic regulatory focus is significantly determined by a

persons accumulated experience in prior goal achievement (Higgins &

Silberman, 1998), which has already been discussed as an antecedent of risk

propensity (Sitkin & Pablo, 1992). At the same time, regulatory focus occurs

as a situational variable, typically manipulated by problem framing that

triggers signal detection mechanisms. Problems framed in terms of gains or

non-gains trigger a situational promotion focus, whereas problems framed

in terms of losses and non-losses trigger a situational prevention focus

(Frster, Higgins, & Idson, 1998). Importantly, situational regulatory focus

is significantly determined by problem framing (Idson & Liberman, 2000),

which has already been identified as an antecedent of risk perception (Sitkin

& Pablo, 1992). Moreover, both the chronic and situational forms of

regulatory focus are uncorrelated and can therefore occur in convergent or

divergent combinations (Higgins & Spiegel, 2005). When the combination is

convergent, a person will possess chronic and situational promotion focus,

or chronic and situational prevention focus. In contrast, when divergent, a

person will possess chronic promotion focus and situational prevention

focus, or chronic prevention focus and situational promotion focus.

Empirical studies show that such convergent and divergent combinations

of chronic and situational regulatory focus may result in different effects

(Keller & Bless, 2006; Pennington & Roese, 2003; Shah et al., 1998). People

with convergent chronic and situational regulatory focus experience greater

motivational strength, either in eagerly approaching gains from a promotion

focus or in vigilantly avoiding losses from a prevention focus. In contrast, people

with divergent regulatory focus experience weaker motivational strength and

more ambiguous goals (see Frster et al., 1998; Idson, Liberman, & Higgins,

2004; Keller & Bless, 2006). Patterns of convergence and divergence also

influence emotional responses (Higgins, Shah, & Friedman, 1997; Idson &

Liberman, 2000). Those with convergent chronic and situational promotion

focus will experience stronger cheerfulness-type emotions when successful, and

stronger dejection-type emotions when unsuccessful, whereas people with

convergent chronic and situational prevention focus will experience stronger

quiescence-type emotions when successful and stronger agitation-type emo-

tions when unsuccessful. Divergent patterns of regulatory focus, in contrast,

may result in confused and ambiguous emotional responses (Brockner & Higgins


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REGULATORY FOCUS AND RISK-TAKING

Higgins and his colleagues (Higgins et al., 2001) argue that regulatory focus

has important implications for decision-making and problem-solving, both

as a chronic individual variable and as a situationally manipulated variable.

For example, Higgins (2002) has shown that people in a promotion focus

will value attainment decisions more highly than avoidance decisions; that

is, they will value decisions made in the pursuit of gains more highly than

decisions made in the avoidance of losses. The opposite tendencies apply for

people in a prevention focus. Separately, Grant and Higgins (2003) show that

promotion focus is related to being eager, risky, and oriented towards attain-

ing gains as positive outcomes, whereas prevention focus is related to being

careful, cautious, and oriented toward avoiding losses as negative outcomes.

While Crowe and Higgins (1997) show that acting from a promotion focus

inclines people to ensure hits and ensure against errors of omission, produc-

ing an exploratory risk-seeking bias and the use of more decision means,

whereas acting from a prevention focus inclines people to ensure correct

rejections and ensure against errors of commission, producing a conserva-

tive risk avoidance bias and the use of fewer decision means (Higgins, 2002).

In another recent study, Kluger et al. (2004) show that under a prevention

focus, feelings of probabilities closely replicate those predicted by prospect

theory; while under a promotion focus, the pattern suggests a general eleva-

tion of felt probabilities, compared to those predicted by prospect theory.

Importantly, regulatory focus theory introduces three sets of related

distinctions that have not been incorporated into earlier models of risky

decision-making. First, regulatory focus theory distinguishes between two

types of orientation towards achievement success. On the one hand, when

acting from a promotion focus, people are motivated to use eagerness

means in pursuing attainment goals as they seek gains and try to avoid non-

gains. On the other hand, when acting from a prevention focus, people are

motivated to use vigilance means in pursuing avoidance goals as they seek

non-losses and try to avoid losses (Higgins & Spiegel, 2005). Second,

regulatory focus theory recognises the situational nature of human agency

by distinguishing between acts of commission versus acts of omission and

their likely outcomes. In particular, when acting from a promotion focus,

people are more inclined to act and thereby avoid errors of omission.

Alternatively, when acting from a prevention focus, people are more inclined

not to act and thereby avoid errors of commission. Third, regulatory focus

stimulates different patterns of emotional responses. From a promotion

focus, success stimulates cheerfulness-type emotions and failure stimulates

dejection-type emotions whereas from a prevention focus success


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When these distinctions are considered together, a promotion focus is

positively associated with performing acts of commission in response to

perceived chances of gains and avoiding errors of omission in response to

perceived chances of non-gains, and success or failure in such pursuits

stimulates cheerfulness or dejection-type emotions, respectively. In contrast,

a prevention focus is positively associated with performing acts of omission

in response to perceived chances of non-losses and avoiding errors of

commission in response to perceived chances of losses, and success or failure

in these pursuits stimulates quiescence or agitation-type emotions, respectively

(Higgins et al., 1999). We contend that these distinctions warrant inclusion

in the analysis of risky decision-making.

Regulatory Focus and Risk Propensity

Recall that chronic promotion and prevention focus are derived from a

persons developmental and achievement history in attaining gains and

avoiding losses, respectively (Higgins et al., 2001). This relationship to

outcome history suggests a link between chronic regulatory focus and risk

propensity. Studies show that a chronic promotion focus entails a propensity

to take greater risks, whereas a chronic prevention focus entails greater risk

aversion (Grant & Higgins, 2003). Other studies show that a persons

chronic regulatory focus influences the perceived moral intensity of outcomes

when committing acts of omission or commission (Camacho, Higgins, &

Luger, 2003). At the same time, Sitkin and his colleagues (Sitkin & Pablo,

1992; Sitkin & Weingart, 1995) show that decision-makers seek risks related

to potential gains if prior risk-seeking actions were successful, and avoid

risks related to potential losses if prior risk-seeking actions were unsuccessful.

It must be noted, however, that like many others, Sitkin and his colleagues

assume that risk-seeking refers to potential gains rather than non-losses,

and that risk avoidance refers to potential losses rather than non-gains.

Notwithstanding this limitation, their findings show that a persons risk-

taking outcome history will significantly influence their propensity to seek

or avoid similar risks in future, thereby sharing common foundations with

chronic regulatory focus.

We extend these findings by distinguishing between a history of risk-

taking achievement in attaining gains and avoiding non-gains (reinforcing

chronic promotion focus), and a history of risk-taking achievement in

avoiding losses and attaining non-losses (reinforcing chronic prevention

focus). First, when acting from a chronic promotion focus, people tend to

approach new tasks as opportunities to attain gains. They are oriented

towards new task goals with eagerness approach means and seek to achieve


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propensity in relation to commission risk (seeking gains that could result

from acting), and a risk-avoidance propensity in relation to omission risk

(avoiding non-gains that could result from failing to act) (cf. Crowe &

Higgins, 1997). Moreover, studies suggest that the stronger the chronic

promotion focus, the stronger the risk propensity in these respects (Higgins

et al., 1999). We therefore contend that chronic promotion focus influences

the effect of outcome history on risk propensity by inclining people to seek

commission risks (defined as the chance of outcomes resulting from acting)

and avoid omission risks (defined as the chance of outcomes resulting from

not acting). We further contend that chronic promotion focus inclines people

towards stronger commission risk-seeking propensity, in comparison to

omission risk-avoiding propensity (cf. Frster et al., 1998; Idson et al., 2004).

Proposition 1a

: Chronic promotion focus is positively related to the propensity

to seek commission risks because they could result in gains.

Proposition 1b

: Chronic promotion focus is positively related to the propensity

to avoid omission risks because they could result in non-gains.

Proposition 1c

: When acting from chronic promotion focus, the propensity

to seek commission risks is stronger than the propensity to avoid omission risks.

On the other hand, when people act from prevention focus, they tend to

perceive new tasks in terms of avoiding potential losses. In other words,

people who act from prevention focus are oriented towards new tasks with

vigilance means and the goal of avoiding negative outcomes (Higgins et al.,

2001). This in turn suggests that people acting from chronic prevention

focus will tend to exhibit a risk-seeking propensity in relation to omission

risks that could result in non-losses, and a risk-avoidance propensity in

relation to commission risks that could result in losses. Thus, we contend

that chronic prevention focus influences the effect of outcome history onrisk propensity by inclining people to seek omission risks and avoid

commission risks. We also contend that chronic prevention focus inclines

people towards stronger commission risk-avoiding propensity, in comparison

to omission risk-seeking propensity.

Proposition 2a

: Chronic prevention focus is positively related to the propensity

to seek omission risks because they could result in non-losses.

Proposition 2b

: Chronic prevention focus is positively related to the propensityto avoid commission risks because they could result in losses.


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Notably, this paper is among the first to make explicit claims regarding

the relationship between outcome history, regulatory focus, and risk propensity

(cf. Higgins, 2002; Kluger et al., 2004). Yet these links are implicitly drawn

by Sitkin and Pablo (1992) when they argue that if decision-makers can link

outcomes to their actions, those who have been successful by being

risk-averse will become increasingly risk-averse, and those who have been

successful by being risk-seeking will become increasingly risk-seeking. As

noted earlier, similar processes underpin the development of chronic

regulatory focus, whereby a developmental history of positive attainment

and reinforcement leads to chronic promotion focus, and a history of

preventative achievement and reinforcement leads to chronic prevention

focus (Higgins et al., 2001; Higgins & Silberman, 1998). These findings also

suggest a deeper role for regulatory focus in risk perception, as we explain

in the next section.

Regulatory Focus and Risk Perception

Framing situations in terms of gains and non-gains triggers a situational

promotion focus, thus inclining people to approach task situations using

eagerness means to attain gains (Crowe & Higgins, 1997; Higgins, 2002).

People then employ more goal pursuit means and have a heightened

awareness of positive commission risk defined as the positive consequences

of acting (achieving gains), as well as a heightened awareness of negative

omission risk defined as the negative consequences of failing to act (achieving

non-gains), whereas framing situations in terms of losses and non-losses

triggers a situational prevention focus, thus inclining people to approach

situations using vigilance means to avoid losses. People then employ fewer

goal pursuit means and have a heightened awareness of positive omission

risk defined as the positive consequences of not acting (achieving non-losses),

as well as a heightened awareness of negative commission risk defined as the

negative consequences of acting (achieving losses) (Higgins, 2002).

These distinctions are directly relevant to problem framing as an antecedent

of risk perception. That is, framing problems in terms of gains or losses

triggers situational regulatory focus which in turn influences the perception

of risk (Keller & Bless, 2006; Shah et al., 1998). First, when acting from

situational promotion focus, people are more inclined to perceive the chance

of gains as positive risk and the chance of non-gains as negative risk.

Alternatively, acting from a situational prevention focus inclines people to

perceive the chance of non-losses as positive risk and the chance of losses

as negative risk (cf. Williams & Voon, 1999; Williams, Zainuba, & Jackson,

2003) It follows that in some circumstances the same potential outcome can


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& Liberman, 2000). Thus, framing risks in terms of gains and non-gains, or

in terms of losses and non-losses, triggers situational promotion and prevention

focus, respectively, which in turn influence whether such risks are perceived

as positive or negative. To date, however, these distinctions have been

largely ignored in studies of risky decision-making. Scholars typically draw

distinctions in terms of outcome valence and ignore signal detection

mechanisms. Consequently, they assume that positive risk refers to the chance

of achieving gains and negative risk refers to the chance of incurring losses

(e.g. Kahneman & Tversky, 2000b; McNamara & Bromiley, 1999; Simon &

Houghton, 2003). In contrast, we argue that depending on a persons

situational regulatory focus, the chance of non-losses can also be perceived

as positive risk from a prevention focus, and the chance of non-gains can

be perceived as negative risk from a promotion focus (Liberman et al., 2005).

These distinctions can also be stated in relation to acts of commission and

omission. From a situational promotion focus, people tend to perceive acts

of omission as negative risks because such acts could lead to non-gains, and

they tend to perceive acts of commission as positive risks because they could

lead to gains. Moreover, they tend to perceive positive commission risk

more intensely than negative omission risk because they regard attaining

gains as more important than avoiding non-gains (see Idson & Higgins,

2000). These tendencies are further amplified because acting from promotion

focus inclines people to more eager pursuit of gains and the use of more

decision means. Therefore, any single act of commission in risky decision-making

is viewed as less critical compared to multiple decision means.

Proposition 3a

: When acting from situational promotion focus, omission

risks are perceived as negative risks because they could result in non-gains.

Proposition 3b

: When acting from situational promotion focus, commission

risks are perceived as positive risks because they could result in gains.

Proposition 3c

: When acting from situational promotion focus, the perception

of positive commission risks is more intense than the perception of negative

omission risks.

On the other hand, a person acting from situational prevention focus will

tend to approach new tasks with a desire to avoid losses. This in turn will

lead to alternative perceptions of omission risk and commission risk. Such

people will tend to perceive acts of omission as positive risks because they

could lead to non-losses. On the other hand, they will tend to perceive acts

of commission as negative risks because they could lead to losses Moreover


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focus leads people to use fewer decision means in order to avoid losses.

Thus, any single act of commission in risky decision-making is viewed as

more critical compared to fewer decision means. We therefore contend that

situational prevention focus influences risk perception.

Proposition 4a

: When acting from a situational prevention focus, omission

risks are perceived as positive risks because they could result in non-losses.

Proposition 4b

: When acting from a situational prevention focus, commission

risks are perceived as negative risks because they could result in losses.

Proposition 4c

: When acting from a situational prevention focus, the perceptionof negative commission risks is more intense than the perception of positive

omission risks.

Regulatory Focus and Emotion in Risky Decision-Making

Regulatory focus also stimulates emotional responses. In fact, Higgins and

his colleagues (Higgins et al., 1999, p. 256) argue that the direct experience

of the particular self-regulatory process working or not working is the

emotion. In support of this contention, studies show that people acting

from chronic or situational promotion focus will experience cheerfulness-type

emotions when successful and dejection-type emotions when unsuccessful,

and will experience more intense emotions in relation to potential gains as

opposed to non-gains. In contrast, people acting from either chronic or

situational prevention focus will experience quiescence-type emotions when

successful and agitation-type emotions when unsuccessful, and will experi-

ence more intense emotions in relation to potential losses as opposed to

non-losses. The intensity of these emotional responses also depends on the

convergence of chronic and situational regulatory focus (Idson et al., 2004;

Keller & Bless, 2006). For example, when acting from both chronic and

situational promotion focus, cheerfulnessdejection emotional responses

will be relatively strong and unambiguous.

However, it is important to recall that chronic and situational regulatory

focus are uncorrelated and may occur in divergent combinations (Higgins

& Spiegel, 2005). It is therefore possible for people to experience mixed

patterns of emotion in relation to risky decision-making tasks. For example,

a person may possess chronic promotion focus in combination with

situational prevention focus. Such a person will then experience a mixture

of cheerfulnessdejection emotions from chronic promotion focus as well as

quiescenceagitation emotions from a situational prevention focus Insofar


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risk perception and risk propensity (cf. Higgins et al., 1999). We contend that

these effects underpin emotional responses in risky decision-making.

First, when acting from a chronic promotion focus, people have a

propensity towards seeking commission risk and avoiding omission risk.

Following the reasoning of Higgins and his colleagues (Higgins et al., 1999),

chronic promotion focus is said to be working in these situations, rather

than not working. It follows that when people act from chronic promotion

focus and seek commission risk or avoid omission risk, they will experience

cheerfulness-type emotions. Furthermore, they will experience such

emotions more intensely when seeking commission risk in comparison to

avoiding omission risk. In contrast, when people act from chronic promotion

focus and do not seek commission risk or do not avoid omission risk, they

will experience dejection-type emotions. These emotions will be more

intense when not seeking commission risk in comparison to not avoiding

omission risk (Frster et al., 1998; Shah, Brazy, & Higgins, 2004).

Proposition 5a

: When acting from a chronic promotion focus, cheerfulness-type

emotions are more intense when seeking commission risk than avoiding

omission risk.

Proposition 5b

: When acting from a chronic promotion focus, dejection-type

emotions are more intense when not seeking commission risk than not avoidingomission risk.

Second, when acting from a chronic prevention focus, people have a

propensity towards seeking omission risk and avoiding commission risk.

Once again, chronic regulatory focus is said to be working in these situations,

rather than not working (Higgins et al., 1999). It follows that when people

act from chronic prevention focus and seek omission risk or avoid commission

risk, they will experience quiescence-type emotions, and experience such

emotions more intensely when avoiding commission risk in comparison toseeking omission risk. In contrast, when people act from chronic prevention

focus and do not seek omission risk or do not avoid commission risk, they

will experience agitation-type emotions, and experience such emotions more

intensely when not avoiding commission risk in comparison to not seeking

omission risk.

Proposition 6a

: When acting from a chronic prevention focus, quiescence-

type emotions are more intense when avoiding commission risk than seeking

omission risk.

P iti 6b

: When acting from a chronic prevention focus agitation type


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by creating tendencies towards perceiving omission risk and commission

risk as positive or negative risk. Third, we argue that regulatory focus

underpins complex emotional responses in risky decision-making, depending

on whether regulatory focus is working or not working in relation to risk

propensity and/or risk perception. The fundamental distinction drawn in

each set of propositions is between alternative approaches to acts of omission

and commission, and the different patterns of risk perception, risk propensity,

and associated emotional responses. These proposed relationships are

combined in a new model of risky decision-making in Figure 1. The figure

depicts outcome history as an antecedent of both chronic regulatory focus

and risk propensity, and depicts problem framing as an antecedent of both

situational regulatory focus and risk perception. Figure 1 also shows the

influence of chronic and situational regulatory focus with respect to risk

propensity, risk perception, and emotional responses in risky decision-

making.

The propositions we have developed therefore suggest that risky decision-

making cannot be understood in terms of gains and losses simply defined,

but must take into account the risk-takers regulatory orientation. When

viewed from this perspective, a specific act of commission may be perceived

as a positive risk of gain from a promotion focus, yet perceived as a negative

risk of loss from a prevention focus. Contrariwise, a specific act of omission

may be perceived as a positive risk of non-loss from a prevention focus, yet

perceived as a negative risk of loss from a prevention focus. In previous

studies, these distinctions are rarely drawn (see Kluger et al., 2004).

Moreover, both scenarios can apply to exactly the same problem situation,

and may only differ in terms of the framing conditions and actors

regulatory orientations. Consequently, we contend that the analysis of


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risk-taking must incorporate these distinctions and the historical and situa-

tional factors that influence agents inclinations to commit or omit action.

The proposed model in Figure 1 does so.

DISCUSSION

Our propositions and model have a number of important implications for

future theory development and empirical research. First, building on the

pioneering work of Kahneman and Tversky (1979), many scholars investigate

the role of problem framing in risky decision-making. As noted earlier, this

research typically assumes that positive risk framing refers to chances of

gains and negative risk framing refers to chances of losses. In contrast, we

argue that positive risk can refer to either chances of gains from a promotion

focus, or chances of non-losses from a prevention focus; while negative risk

can refer to either chances of non-gains from a promotion focus, or chances

of losses from a prevention focus (Idson & Liberman, 2000). This implies

that a specific outcome prospect could be perceived as either a negative or

positive risk, depending on the regulatory focus of the perceiver. More

specifically, an act of omission can be perceived as a positive risk from a

prevention focus (chance of non-loss), or perceived as a negative risk from

a promotion focus (chance of non-gain). Alternatively, an act of commission

can be perceived as a positive risk from a promotion focus (chance of gain),

or perceived as a negative risk from a prevention focus (chance of loss).

Previous research conflates these fundamental distinctions between acting

and not acting, thereby failing to uncover important factors in risky

decision-making and their implications for the analysis of agentic behavior

(see Bandura, 2006; Mischel, 2004).

Importantly, our model also suggests that commission risk stimulates

more intense cognitive and emotional responses, in comparison to omission

risk. On the one hand, from a promotion focus, commission risk stimulates

more intense risk-seeking propensity, positive risk perception, and cheerfulness-

type emotions, as people use stronger eagerness approach means with

respect to potential gains. On the other hand, from a prevention focus,

commission risk stimulates more intense risk-avoidance propensity, negative

risk perception, and agitation-type emotions, as people use stronger vigilance

avoidance means with respect to potential losses (see Frster, Grant, Idson,

& Higgins, 2001; Idson & Higgins, 2000). By comparison, omission risk

stimulates less intense risk-avoiding propensity, negative risk perception, and

dejection-type emotions from a promotion focus as people seek to avoid non-

gains, while omission risk stimulates less intense risk-seeking propensity,

positive risk perception and quiescence-type emotions from a prevention focus


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Other conflations abound in the literature with respect to the emotional

responses and felt intensities of risky decision-making. Following Kahneman

and Tversky (1979) once again, scholars typically associate positive emotions

with potential gains and negative emotions with potential losses (Liberman

et al., 2005). However, this analysis conflates the different emotional

responses associated with regulatory focus working or not working (Higgins

et al., 1999). In contrast, our model suggests that positive and negative

emotions occur in relation to both promotion and prevention orientations

in risky decision-making, and that these emotional responses vary in both

nature and intensity depending on the relative strength and degree of

convergence between chronic and situational regulatory focus. For example,

our model suggests that negative dejection-type emotions are associated

with not seeking commission risk from a promotion focus, while negative

agitation-type emotions are associated with not avoiding commission risk

from a prevention focus. That is, depending on a persons regulatory focus,

they will experience very different negative emotions in relation to regulatory

focus not working in relation to perceived commission risk. Apart from

recent work by Higgins and others (Higgins, 2002; Idson & Liberman, 2000;

Kluger et al., 2004), such fundamental distinctions are not made in previous

treatments of risky decision-making.

As a related contribution, our model throws new light on the important

distinction derived from Tversky and Kahnemans (e.g. 1986, 1991)

prospect theory, that losses are felt more intensely than foregone gains.

Our model provides a possible explanation for this effect. Building on the

analysis offered by Higgins and his colleagues (Higgins, 2002; Liberman

et al., 2005), the model suggests that acting from prevention focus results in

more intense negative agitation-type emotions when a person fails to avoid

negative commission risk (thus incurring losses); whereas, acting from pro-

motion focus results in less intense negative dejection-type emotions when a

person fails to avoid negative omission risk (thus foregoing gains). This

constitutes a novel contribution to the explanation of these observed effects.

Given the importance of these phenomena within the study of risky

decision-making, we encourage researchers to explore these proposed

relationships further.

Additional implications flow from our model with respect to the interaction

of emotion and heuristic bias in risky decision-making. The model suggests

that when acting from promotion focus, a persons actual and anticipatory

emotional response may strengthen biases that inflate the chances of gains

from acts of commission and deflate the chances of non-gains from acts of

omission. Alternatively, our model suggests that when acting from prevention

focus a persons actual and anticipatory emotional response may strengthen


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suggest that these effects would be enhanced because regulatory focus is

thus concurrent with heuristic biases as goal pursuit means (Idson et al.,

2004). If these arguments are correct, then regulatory focus underpins

fundamental patterns of cognitiveaffective interaction that have been

ignored in most prior studies of heuristic bias in risky decision-making. We

therefore welcome studies that start to address these aspects of risk-taking

(e.g. Bryant, 2007; Higgins, 2000a; Kluger et al., 2004).

Related implications flow for strategic decision-making. Studies show

that positive emotion inclines decision-makers to frame situational risks

more positively, yet leads to risk-avoidance owing to the desire to maintain

a positive emotional state (Mittal & Ross, 1998; Williams et al., 2003). A

reverse pattern occurs in relation to negative emotion, which encourages

negative risk framing and greater risk-taking owing to the desire to improve

ones emotional state. However, these studies conflate the important

distinction between cheerfulnessdejection-type emotions and quiescence

agitation-type emotions under promotion or prevention focus, respectively.

That is, depending on the decision-makers dominant regulatory orientation,

he or she will experience different positive and negative emotions in

strategic decision-making. For example, if an executive acts from prevention

focus, he or she would be inclined to experience positive quiescence-

type emotions when seeking risks of omission; yet an executive acting from

promotion focus would be inclined to experience negative dejection-type

emotions when not avoiding the equivalent risks of omission. Therefore, an

omission risk can be associated with either a positive or negative emotional

response, depending on the decision-makers regulatory orientation. These

complex relations warrant attention in future research into the role of

emotion in strategic decision-making and the influence of emotional climate

on these processes (see Brockner & Higgins, 2001; Wallace & Gilad, 2006).

In summary, our model suggests that complex psychosocial, historical,

and situational factors require greater attention in future research, because

these factors are among the antecedents of regulatory focus. However, risky

decision-making has often been studied experimentally using contrived

scenarios that are devoid of situational and historical context (Bazerman,

2001; Williams et al., 2003). In contrast, we argue that the study of risky

decision-making requires close attention to these factors. Therefore we

encourage researchers to incorporate these elements into future research

design. This is especially important for research into specific task domains

such as organisational and management decision-making, where contextual

factors appear to play a major role in risk-taking (March & Shapira, 1987;

Sitkin & Pablo, 1992) and situational regulatory focus (Brockner & Higgins,

2001)


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BRYANT AND DUNFORD

and social settings. Instead of assuming that risk perception and risk

propensity are more or less stable and fixed, organisations and individuals

could adopt social cognitive strategies that may alter risk-taking behaviors

through reinforcing and/or priming regulatory focus. For example, by

making appropriate interventions that influence situational regulatory

focus, people may be led to frame risks as more or less positive or negative

in particular problem situations (Higgins & Spiegel, 2005). Other techniques

could be employed to encourage or discourage access to chronic regulatory

focus, thereby influencing a persons risk propensity. If such techniques can

be developed, they would provide new management tools in situations

where people needed to be more concerned with either avoiding losses from

a prevention focus, such as insurance and credit risk, or attaining gains

from a promotion focus, such as sales and marketing campaigns.

Conclusion

We took as a starting point our agreement with the behavioral critique of

the classical Bayesian assumptions that still frame much of the debate about

risk-taking (see Gigerenzer, 1996; Kahneman & Tversky, 1996). These

assumptions include the belief that complete information is potentially

available, that rationality is ideally unbounded and objective, and that

human decision-making is primarily aimed at utility maximisation. This

classical perspective also assumes that all problem situations share the same

fundamental risk characteristics. In the past, those assumptions led to a

distorted view of the risk-taking process (Schwartz, 2002) and skewed the

analysis of risk-taking by neglecting psychosocial factors and situational

variables. They also failed to recognise that people have different risk

responses and outcome preferences reflecting psychosocial factors that

include self-regulatory orientation.

In response to these limitations of classically inspired theories of risk,

numerous scholars have developed models that seek to incorporate the

situational and psychosocial factors that influence risky decisions. As a

result, we now have a far deeper understanding of the role played by cognitive

biases, affective states, achievement outcome history, dispositional prefer-

ences, and situational factors. However, there is still much work to do and

significant gaps remain. In seeking to advance understanding of these processes,

this paper investigates the role of regulatory focus in risky decision-making.

It argues that regulatory focus plays a complex role in risky decision-

making. In particular, the paper argues that chronic regulatory focus

influences risk propensity, and that situational regulatory focus influences

risk perception In addition the paper argues that regulatory focus working


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summarises these arguments and the propositions derived from them.

Numerous implications follow for those fields concerned with the analysis

and management of risk. We encourage future researchers to expand and

test the model and propositions derived in this paper.

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