The Attitude Toward Risk in Japanese Management

In various fields of economics and management studies, risk and uncertainty — in the context of this chapter used synonymously — have been found to be important concepts as we attempt to understand and analyze behavior. At the very core of an institutional approach to socio-economic studies, Douglass North understands institutions as a reaction to the constitutive uncertainties of the real world surrounding humankind, by creating ‘islands’ of order and reliability: ‘The beliefs and institutions that humans have devised only make sense as an ongoing response to the various levels of uncertainty …’ (North, 2005, p. 14). Gaps between competence and the difficulty of a decision problem (C-D gap, Heiner, 1983) lead to rules/institutions that restrict the flexibility of choices. Institutional change in a society is thus shaped by the interaction of institutions (understood as formal and informal rules of the game, enforcement characteristics) and organizations (players). Uncertainty and the perception of uncertainty are important, if not the principal sources for opportunities to change and to stabilize institutions. From a more ‘down to earth’ business perspective, the definition of an ‘entrepreneur’ almost always contains a reference to his or her risk-taking, distinguishing him/her from others who do not see risk as an opportunity for fruitful action. The concept of risk is thus a cornerstone for understanding entrepreneurship and business.