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Purpose: 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). Design/methodology/approach: The paper applies the new theory …
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The paper clarifies how sunk costs can lead a rational incumbent to innovate less than an entrant. It also demonstrates that competition among incumbents yields less adoption of new and more efficient production technology than competition which includes entrants. The results suggest that policy...
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