Environmental Uncertainty

Environmental uncertainty is a perceptual construct.

Though some scholars view environmental uncertainty as an objective attribute, it is generally regarded as a perceptual construct. Perception is a function of contextual factors, individual attributes, and cognitive reasoning. External environmental attributes are sources of perceived environmental uncertainty, which are also influenced by differences in motivation, attitudes, and risk propensity of the perceiver. While dimensions of environmental attributes are often used interchangeably as dimensions of environmental uncertainty, it is important to distinguish the sources and types of environmental uncertainty. Specifying the sources of uncertainty identifies the domain of the environment which the decision maker is uncertain about (e.g., technology or market), while specifying the types of uncertainty focuses on delineating the nature of uncertainty being experienced.

Environmental uncertainty is a multidimensional construct.

Environmental uncertainty is classified into three types: state, effect, and response uncertainty. State uncertainty represents the inability to predict how the components of the environment are changing. Effect uncertainty describes the inability to predict the impact of the change in the environment of the organization. Finally, response uncertainty is a lack of insight into response options and/or the inability to predict the likely consequences of a response choice given a changing environment. Such a classification implies a conceptual distinction among different types of uncertainty as a function of lack of information in the different aspects of how environmental change influences organizational

behaviors. The classification also suggests different types of uncertainty have different implications for decision making in an organization.

Environmental components.

Environmental uncertainty can be derived from several environmental components, such as customers, suppliers, competitors, distributors, regulatory factors, union issues, and technology. Among these factors, technology and markets are the best known sources of environmental uncertainty due to ongoing changes and developments within market composition and technology.

Technological uncertainty refers to the degree of familiarity with the given technology or the degree of change in the technologies relative to products developed or manufactured by a company. Technological uncertainty is high where technology is new or rapidly changing.

...