**Abstract**

This chapter discusses prospect theory, which describes how people evaluate choices in terms of potential gains and losses and tend to be loss-averse. When it comes to innovation, the theory suggests that people are risk-averse, but may be more likely to take risks if they perceive potential losses instead of gains. The theory can also help understand how entrepreneurs make decisions. This chapter also mentions advances in behavior genetics and epigenetics that may influence innovationpromoting behaviors, but culture and how ideas spread are also important. To move innovation forward, it is important to carefully analyze risks, benefits, costs, and potential impacts and involve all relevant stakeholders in the process of innovation development and implementation.

**Keywords:** prospect theory, innovation, risk aversion, entrepreneurship, behavior genetics, epigenetics, cognitive biases, decision-making
