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

Abstract

We 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 misinterpret central arguments from prospect theory. Further, they illustrate that applying prospect theory in organizational settings poses several theoretical and methodological challenges. Thus, we review these studies, critically analyze them, and make suggestions to enrich future work.