Loss-aversion in R&D investment propensity responding to profitability

R&D investment strategy is important for the growth of an enterprise profit. However, there is always a trade-off between short-term profits and R&D expenditure for the firm´s decision-making. In this decision-making, R&D investment by an enterprise is considered as a combination between the `genotype´ of the industry that the enterprise belongs to and the `phenotype´ of the enterprise that has been acquired from its past investment experiences. In short, the enterprises tend to carry out their routine R&D investment, but in some cases, the same enterprises might reveal a phenotypical pattern in response to the decline of the profitability, which results in `Loss Aversion´. In this study, the financial statements of 1,592 enterprises were analyzed by their R&D investments strategy, finding that the loss aversion differently appears responding to the short-term profitability and different R&D investment patterns were observed according to the type of industry and the lasting period of the profitability.