Exploring the value of a novel decision-making theory in understanding R&D progress decisions

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 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. Findings: 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. Research limitations/implications: 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. Practical implications: 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. Originality/value: 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.