The impact of myopic loss aversion on continuing a troubled research and development expenditure
Year: 2011
Type: article
Abstract: Research and development (R&D) expenditure involve much risk and uncertainty. Failure of a research and development project is a common and dreaded question in innovation processes as a result of causing large losses to businesses. This study explored whether shortening evaluation periods could reduce the willingness of managers of research and development expenditure in continuing a troubled research and development project. The study employed 180 senior managers of high-tech companies as subjects of experimental test. The results indicate that continuing a risky investment decision is less likely in the context of a shorter evaluation period (myopic condition) because decision-makers will experience more frequent losses, leading to the tendency of decision-makers to avoid risk. The theory of ‘myopic loss aversion’ is useful in explaining this phenomenon.
DOI: 10.5897/ajbm09.093
Authors: Kuo‐Chih Cheng, Kuang-Ku Chen
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W2167990624