Behavioral Biases and Corporate Decision Making on Investing Abroad
AbstractIn this paper we have studied the role of biases in making corporate decisions on investing abroad. We have formulated four conditions under which a corporate investment decision is least exposed to the influence of heuristics. Failing to comply with some conditions of a precise investment performance leads to a situation of a high uncertainty and complexity that demands an intuitive thinking from a decision maker and, as a result, stimulates using the rules of thumb. Further, we have discussed possible measures for the mitigation of the negative influence of heuristics. For an indicative estimation of a degree of biases an ex-ante/ex-post risk perception matrix has been proposed. The study is supported by the results of a survey made in 2008 and structured interviews taken in the spring and the summer of 2013. The survey was carried on among German firms doing business in Russia. Interviews covered not only investments to Russia, but also investments of Russian investors in Europe as well as transatlantic foreign direct investments made in the last three years.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 49858.
Date of creation: Sep 2013
Date of revision:
biases; heuristics; investment decisions; foreign direct investments; decision-making process;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-24 (All new papers)
- NEP-CBE-2013-09-24 (Cognitive & Behavioural Economics)
- NEP-CDM-2013-09-24 (Collective Decision-Making)
- NEP-CIS-2013-09-24 (Confederation of Independent States)
- NEP-TRA-2013-09-24 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Behavioural determinants of Foreign Direct Investment,"
10297, University Library of Munich, Germany.
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- Kotov, Denis, 2009. "How Decisions on Investing in Russia are made by German Firms?," MPRA Paper 16373, University Library of Munich, Germany.
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