A fresh look on financial decision-making from the plasticity perspective

Abstract

Purpose -The purpose of this paper is to propose an integrative framework bringing together results from neuroplasticity and decision-making from a neuroscience perspective with those from market plasticity, i.e. with which practices market actors shape markets.Design/methodology/approach -Provided that developments in neuroscience indicate that training the brain for orientation toward efficient decision-making processes under uncertainty is possible, an in-depth analysis can be conducted by using the integrative framework, which was set up by the authors for advancing research efforts in neuroeconomics and neurofinance on these lines.Findings -Markets have a plastic character; they can change shape and form and remain in that way thereafter. The marketers have always been causing this change to succeed in their marketing strategies and efforts. Plasticity, hitherto considered by marketing, market sociology and evolutionary economics, has a potential in financial decision-making processes, especially regarding its role in training the brain for stable financial decisions.Research limitations/implications -The theoretical approach can be incorporated for delivering an alternative representation of the knowledge processes associated with financial decisions.Practical implications -The practical approach can be used for improving the practical aspects of financial decision-making processes.Originality/value -The contribution is the first of its kind which integrates neuroscience approaches of plasticity and decision-making with the concept of market plasticity from the literature on economics and management, showing their similarities and opening a new front of discussion on how these two approaches can learn from each other to increase the explanatory power of financial decision-making processes and to gain new insights for financial decision makers on how to make more efficient financial decisions in the times of uncertainty.

The Emergence of the ERP Software Market between Product Innovation and Market Shaping

“…However, this is not always the case, especially when complex processes in the real world are taken into account, indicating that the present state is contingent. A product innovation is associated with new technological knowledge, hence, it goes back to "the cognitive structure underlying possible developments in industrial activities" [30] and like in any other process involving human decision making, also the cognitive structures involving product innovations and market shaping activities based on these product innovations are contingent, since they involve the transformation of (objectively available) information to (subjectively generated) knowledge [6,9,10,25], and the conceptualization of this particular bit of subjective knowledge in terms of a business idea [28,29]. These considerations can be operationalized and quantified in a graph theoretical context in order to answer the question of interest.…”

“…The process necessarily involves human mind and its perception of its surroundings. This is done by means of perception-action cycles, where sensory inputs are transformed into tacit knowledge by means of means of a pattern recognition occurring in human mind, and the pattern recognition is based on the unique past experiences of that particular human being [6,9,10,26,27]. In Erkut's [6] framework, this tacit knowledge generation process is expressed in terms of a nano dimension which precedes the introduction of the novelty to the market (the micro dimension).…”

“…The process that smoothly proceeds from the perceptions by means of translating information into knowledge to the generation of a technological artefact is an ideal-typical one of a successful product innovation and the market acceptance. Nevertheless, the author points out to the fact that this is by no means a predetermined process; it is rather contingent due to the contingent nature of knowledge generation, which is central for both business conceptions and market activities [6,9,10].…”

“…A further shortcoming of the neo-Schumpeterian scope of research is to take a dualistic ontological stance on the relation between change in nature and change in economy [37]. This seems to be a problematic view, since knowledge generation relevant for economic change starts in the human mind [6,9,10,27] and through the involvement of human cognition, an interdependency between economy and nature can be established, as the latest attempts to associate the psychologic work of Hayek with his economic theories also demonstrate [6,10,38].…”

“…The question of research is whether the way this new market segment emerged was predetermined, or if the emergence was influenced by contingent events, which would have ended up differently than the factual emergence (meaning that to a given, realized event at a point in time, an alternative event could have been possible, which would have changed the course of the following events). This research question is motivated by the above mentioned dilemma from the perspective of evolutionary economics that the intended market actions of individuals are bounded by contingent circumstances, giving the market a contingent character [6][7][8][9][10]. Based on these considerations, the author provides a review of the literature in Section 2.…”