Can behavioural biases in choice under novelty explain innovation failures?

Abstract

This paper proposes a new framework of ‘behavioural innovation economics’ as a synthesis of behavioural economics and innovation economics in the context of choice under novelty. The standard heuristics and biases framework of behavioural economics is applied to map and analyze systematic choice failures in the innovation process by distinguishing between choice under uncertainty and choice under novelty. Behavioural biases that affect choice under novelty are then elaborated. The paper then suggests 10 ways in which choice under novelty is behaviourally hard, rendering innovation subject to characteristic failure along these behavioural dimensions.