Out of the frying pan…?: Why small business managers introduce high-risk products

Abstract

Some managers in small firms, who are disappointed with their firm's current performance, will introduce new products to improve the situation. Although untested in a small business context, prospect theory suggests that managers who are less satisfied may be more likely to introduce products with riskier characteristics. The current study confirmed this finding that managers who were less satisfied introduced products into less familiar markets and required more resources. The study also provided tentative evidence that these characteristics may decrease the product's economic performance and the manager's subsequent satisfaction with the business, suggesting that a dangerous downward spiral may occur.