Management Theory Applications of Prospect Theory: Accomplishments, Challenges, and Opportunities

TLDR

The authors review management research that applies prospect theory, critically analyze its use in strategic management and organizational behavior, and propose ways to enrich future work. They conduct a literature review of studies applying prospect theory in strategic management and organizational behavior. The reviewed studies contribute to key research streams yet frequently underutilize or misinterpret prospect theory and encounter theoretical and methodological challenges.

Abstract

The authors review management research drawing on prospect theory, focusing primarily on studies in strategic management and organizational behavior/human resource management. These studies have made valuable contributions to several prominent research streams. However, they commonly underutilize or misconstrue central arguments from prospect theory. Furthermore, they illustrate that applying prospect theory in organizational settings poses several theoretical and methodological challenges. Thus, the authors review these studies, critically analyze them, and make suggestions to enrich future work.