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The purpose of this article is to explore the ability of a novel psychological theory of how people make decisions, narrative‐based decision theory, to help explain people's decisions about whether to continue investment in a research and development (R&D) project (R&D progress decisions).

The paper applies the new theory to an empirical finding of existing research on R&D progress decisions; the finding that instruction in the sunk cost principle seems to mitigate the sunk cost effect in R&D progress decision‐making.

By interpreting the empirical finding in terms of narrative‐based decision theory, the paper is able to clarify and extend an earlier explanation for the empirical finding. More specifically, by drawing on narrative‐based decision theory the paper is able to provide a more detailed explanation of how the predictor variable (sunk cost) and the moderator variable (instruction in the sunk cost principle) may exert an influence.

Based on the result of the exploration, the authors call for further investigations into narrative‐based decision theory's value in explaining R&D progress decisions, and other management decisions.

Furthermore, the authors call for investigations into how narrative‐based decision theory may help decision‐makers in improving the quality of R&D progress decisions.

Narrative‐based decision theory is a recent theory from the field of naturalistic decision‐making. To the authors' knowledge, this is the first article that, by using an example, illustrates how the theory may help in explaining the findings of empirical research on management decisions.

Compare and contrast how the accounting, organizational behavior and other literatures analyze sunk costs. Sunk costs form a key part of the decision-making component of the management accounting literature, which generally include previously incurred and unrecoverable costs. Management accountants believe, since current or future actions cannot change sunk costs, decision makers should ignore them. Thus, ongoing fixed costs or previously incurred sunk costs, while relevant for matters of accountability such as costing, income determination, and performance evaluation are irrelevant for most short- and long-term decisions. However, the organizational behavior literature indicates that sunk costs affect decision makers’ actions – especially their emotional attachments to the related project and the asymmetry of attitudes regarding the recognizing of losses and gains. Called the “sunk cost effect” or “sunk cost fallacy,” this conflict in sunk costs’ underlying nature reflects one element of incoherence in contemporary accounting discourse. We discuss this sunk cost conflict from an accounting and a philosophical perspective to denote some ambiguities that decision usefulness and accountability introduces into accounting discourse.

Review, summarize and analyze the above literatures

Managerial accountants can apply many lessons from the various literature sources.

We also show how differing opinions on how to treat sunk costs impact a firm’s decision-making process both economically and socially.

This paper investigates the transaction decoupling phenomenon in purchase and consumption of football match tickets. The theoretical approach describes several economical constructs behind individual decision-making behaviour, including sunk costs, mental accounting and coupling. Results indicate that people who buy bundled tickets are less likely to use their tickets than those who purchase individual ones. Furthermore, the phenomenon proved to be a valid theory in an actual Brazilian football ticket purchase and consumption scenario, confirming that rational elements can also be part of sports consumption. Thus, it can be stated that the type of purchase (bundle or single tickets) influences consumer decision-making.

The purpose of this paper is to examine the sunk-time fallacy in the context of simultaneous variations of time and money when financial expenditures are recoverable. The study compares a recoverable monetary scenario with conditions where money is either not spent or spent, but purchase and payment are decoupled.

A sample of 184 participants was utilised in three experiments. A randomised design was used, and experimental manipulations were achieved using the vignette method.

The results indicate that consumers are susceptible to sunk-time fallacy. Specifically, results suggest that there is no significant difference in sunk cost fallacy when a consumer spends only time vs when a consumer spends money and time both but money can be recovered. The sunk-time fallacy did not occur in credit card purchases. The sunk-time fallacy did not happen in temporal investments of less than a week but appeared in the temporal investments of two weeks.

The study indicates that sunk-time fallacy occurs after a minimum threshold of time is spent on a particular activity.

Online retailers may vary the delivery period of ordered merchandise to reduce product returns. Online retailers may not deliver the merchandise too early to take advantage of the sunk-time fallacy. Bestseller products should be quickly delivered as there are lesser chances of product return. On the other hand, new products or products with mixed consumer reviews should be provided preferably with a time lag beyond a week. Managers should incentivise payments through debit card/net banking and cash-on-delivery to reduce returns by using sunk-time fallacy.

The study is perhaps the first one to study the sunk-time fallacy in a simultaneous variation of time and money where monetary costs can be recovered fully.

Managerial accounting education generally insists that managers should never consider sunk costs. This suggestion seems inconsistent with a common mode of thinking about future rewards: quasi-hyperbolic discounting. This paper aims to explore the conflict between sunk cost consideration and quasi-hyperbolic discounting and to illustrate when sunk cost consideration may be appropriate.

The author conducted three numerical experiments, i.e. simulated experiments based on analytical models, to demonstrate how it can be beneficial to consider sunk costs in some circumstances. All three numerical experiments assume quasi-hyperbolic discounting. First, the author tested considering sunk costs with future rewards that are certain. Second, the author tested considering sunk costs with uncertain future rewards. Finally, the author tested two different educational interventions to change decision-makers’ thought patterns.

The author found that considering sunk costs worsens decisions when there is bad news and improves them when there is good news. The author found that an educational intervention that partially dissuades managers from considering sunk costs improves decisions when bad news arrives and worsens them when good news arrives. The author also found that an educational intervention that reduces uncertainty improves decisions when bad news arrives and does not worsen these decisions when good news arrives.

The author provided numerical examples of situations in which considering sunk costs is valuable. The findings on educational interventions provide information about the tradeoffs of teaching that sunk costs should never be considered.

Based on definition and characteristic analysis, this paper seeks to propose a formation mechanism of knowledge rigidity, which is constituted by the effects of three precipitating factors: time‐effectiveness of knowledge, reinforcing effectiveness, and sunk cost effect in knowledge selection mechanism.

By presenting knowledge time‐effectiveness model, reinforcing effectiveness model, and knowledge selection mechanism, the paper theoretically analyzes firms' rigid behavior of knowledge application. Theories of increasing returns and sunk cost are introduced to explain the formation process of knowledge rigidity in firms. Two cases are presented to analyze the knowledge rigidity in industrial firms basing on the proposed models and mechanism.

First, the lifecycle of knowledge rigidity is dynamically defined by knowledge time‐effectiveness. Second, the degree of rigidity and firm's dependence on specific knowledge are enhanced by reinforcing effectiveness during the process of application. At the end of the life cycle, the sunk cost mainly hinders a firm's decision making to replace ineffective knowledge.

Quantitative research is needed to further explore the formation mechanism of knowledge rigidity and to present operational approaches for practitioners. The proposed models and mechanism are useful for understanding the knowledge rigidity and analyzing its formation mechanism in firms.

This paper provides theoretical support to realize knowledge rigidity in KM practice. Three indicators were proposed to evaluate the rigidity and action suggestions were given to help control knowledge rigidity in firms.

Causal analysis models and a formation mechanism are proposed to show how knowledge rigidity forms.

The purpose of this study is to examine the behaviour of retail investors while making an investment decision and how it gets affected by the behavioural biases of the investors using a moderated-mediation framework.

A mixed method approach has been used to fulfil the objectives of the study. In the first study, a qualitative analysis of the interviews with 15 retail investors was conducted. As part of the quantitative study, a total of 201 responses from Indian retail investors were collected using systematic sampling and analysed using structural equation modelling and Process Macro.

The results indicate that anchoring bias, availability bias, herding bias, switching cost, sunk cost, regret avoidance and perceived threat have a significant effect on retail investors’ investing intention. The attitude of the investors towards investing decisions mediates the effects of behavioural bias and the status quo on investment intention. The results of the moderated-mediation analysis indicate that mediating effect of attitude varied at the low and high-risk aversion of investors.

The findings of this study will help regulators and retail investors to understand the critical behavioural biases which affect the investors’ investing intention.

The paper contributes to the literature on investors’ behaviour, status quo bias theory (SQB) and behavioural bias. This study uniquely proposes a moderated-mediation framework to understand the effects of biases on retail investors’ investment intention.

Although research on foreign market entry and expansion behavior has attracted significant interest in the literature, there is a general lack of research (either conceptual or empirical) on the exit behavior of international companies. To address this issue, the authors develop a conceptual framework to understand firms’ foreign exit behavior. The objective is to lay the conceptual foundation for subsequent empirical research in this area. A series of research propositions have been advanced that can guide hypothesis generation for future research.

This study aims to explore the challenges that the escalation of commitment poses to information security.

Two distinct scenarios of escalation behavior are presented based on literature review. Psychological, organizational and economic theories on escalation of commitment are reviewed and applied to the area of information security.

Escalation of commitment involves continuation of a course of action after receiving negative information about it. In the information security compliance context, escalation affects a firm when an employee decides to break the firm’s information security policy to complete a failing task. In the information security investment context, escalation occurs if a manager continues investment in policies and solutions that are ineffective because of psychological, organizational or economic factors. Both of these types of escalation may be prevented with de-escalation techniques including a change in management or rotation of duties, monitoring, auditing and governance mechanisms.

Implications of escalation of commitment behavior for information security decision-makers and for future research are discussed.

This study complements the literature by establishing the context of escalation of commitment in decisions related to information security and reviewing managerial and economic theories on escalation of commitment.

What makes managers choose to continue taking classes and seminars to further their management development? In the past twenty years, motivated and behavioural theory has been applied to the career decision‐making process in management development. Two approaches, expectancy theory and, to a lesser extent, justification processes have been investigated. The major difference between the two approaches is that expectancy theory suggests that managers are primarily forward‐looking in their careers and management development, whereas justification takes the position that managers attempt to make present career behaviours consistent with past career actions.