**3. Possible solutions: genetics, epigenetics, and culture: the challenges and strategies to deal with risks in business innovation**

No one escapes the deleterious effects of cognitive biases, not even innovators, so innovators can suffer from the biases studied by Prospect Theory. For example, an entrepreneur may show loss aversion when carrying out an innovation project, causing him to abandon the idea of innovating and opt for conventional solutions—nothing innovative. However, some behavioral economics strategies and new developments in neuroscience and genetic research can help entrepreneurs deal with cognitive biases.

For example, Schumpeterian achievers excel at overcoming loss aversion. In fact, these entrepreneurs are not afraid, seeming always willing to take risks even in the face of the possibility of losses. Thus, if an individual identifies with the profile of the Schumpeterian entrepreneur, he has a competitive advantage over other candidates for innovators.

Genetic mechanisms seem to affect how people deal with risk and uncertainty. Innovation demands from entrepreneurs a certain degree of balance between anxiety and courage. And, this assertive behavior can be developed by habits, training, rituals, among other techniques that can be learned. However, this behavior can also come programmed into the individual's DNA. In an article called "Warriors Versus Worries: The Role of COMT Gene Variants," psychiatrist and researcher Dan Stein suggests that certain personality traits, such as a tendency toward anxiety or impulsivity, may be influenced by specific genes. For example, studies have identified that certain variants of the COMT gene are associated with individual differences in dopamine regulation in the brain, which can affect the tendency toward anxiety.

Furthermore, when considering the influence of genetics on human behavior, it is important to include another relevant topic: epigenetics. Epigenetics refers to enduring modifications to DNA that do not entail modifications to the sequence itself. These changes can be influenced by environmental factors such as nutrition, stress, and exposure to toxins, and can affect gene expression and, consequently, behavior. Understanding epigenetics can help explain how environmental factors can interact with genetics to influence human behavior [11]. Although epigenetics is still a developing area of research, some studies suggest that exposure to certain environmental factors can lead to epigenetic changes that can affect personality traits relevant to entrepreneurship, such as courage and resilience. For example, a recent study has shown that exposure to adversity in childhood can lead to epigenetic changes that affect the regulation of cortisol, a hormone associated with stress. These changes can increase the likelihood of developing anxiety disorders, but they can also lead to greater resilience in some people [12]. Another study indicated that nutrition during pregnancy can affect the expression of genes related to behavior in children, including impulsivity and attention. These results suggest that proper nutrition may be important for the development of personality traits relevant to entrepreneurship [13].

At this point, it is worth highlighting an intriguing way of presenting the entrepreneurial spirit. A research conducted by Daniel Lerner and his team at the IE Business School in Madrid investigated the medical and professional backgrounds of 74,291 women from Denmark. Women infected with the Toxoplasma gondii parasite were found to be more likely to found a startup, 27% more likely to find multiple ventures, and more than twice as likely to find their own businesses alone compared to other uninfected women. Furthermore, the startups created by the infected women were, on average, more successful than those created by their uninfected peers. It is concluded, therefore, that the presence of the parasite may be related to an increase in the entrepreneurial spirit in women [14].

Rodents infected with the Toxoplasma gondii parasite have been observed to display behavioral changes, including reduced risk aversion. This may include more active and exploratory behavior, as well as a reduced fear of cats. Some researchers suggest that these behavioral changes could have similarities with entrepreneurial traits. This association between parasite infection and behavioral changes is also seen

## *Innovation and Entrepreneurship: The Role of Prospect Theory in Decision-Making DOI: http://dx.doi.org/10.5772/intechopen.111396*

in humans, with increasing evidence that infection can alter neurotransmitter and hormone production, resulting in changes similar to rodent behavior. People infected with the parasite may have increased extroversion and greater risk tolerance, which may be reflected in behaviors such as involvement in traffic accidents or drunken swimming [15].

Although biology has brought enormous advances to the science of behavior, ethical limits prevent organizations from conducting experiments with their collaborators, including genetic, epigenetic, hormonal tests, and forays into the Fungi Kingdom. Therefore, the role of culture in innovative behavior is crucial and more easily adopted as a solution. Indeed, it is the only possible means of managing human behavior. Although there are many areas of study in this field, in this work, we will focus on the field of memetics.

It is a field of study dedicated to understanding how ideas, behaviors, beliefs, and other cultural information in a society propagate. Memes are units of information passed from person to person, just as genes are passed from generation to generation. Therefore, memetics explores how memes spread and evolve within human culture [16]. Entrepreneurs can use memetics to better understand how ideas spread related to the problem of cognitive biases work within their own teams and organizations. They can use "organizational culture" techniques to create a culture that promotes, for example, solutions for dealing with loss aversion in innovative projects.

And, memetics can help make better decisions in contexts of risk and uncertainty in several ways. For example: understanding cultural and behavioral patterns; understanding how the information was propagated, that is, the reliability of the information source; identifying market trends; developing effective communication with people of interest.

An effective, but less specific, way to deal with existing problems in the face of risk situations is a technique developed by professors Richard Thaler and Cass Sunstein, in the book "Nudge: How to make better decisions about health, money and happiness." Above all, the architecture of choice alters a person's behavior in predictable ways without prohibiting that choice and, if so, significantly altering their economic incentives. Choice architecture seeks to improve people's decisions by strategically organizing the information and options presented to them. Compared to common economics and management approaches (such as education and financial incentives), choice architecture is more effective at improving people's decisions. This is because these methods depend on the ability of individuals to act in their own interest, something that is often not the case. Furthermore, these methods try to change how people process information and make decisions, which can be difficult to achieve [17].

The behavioral economics department at Harvard University has been breaking new ground in applying the architecture of choice. These insights can help economic agents to adopt policies to better deal with cognitive biases. This can be done by taking the following five steps [18]:


Efforts to improve decision-making through behavioral economics can be seen in business, the public sector, and academia. There are internal laboratories, annual events, courses, study centers, and even government offices dedicated to the subject of behavioral economics. However, few of these centers are dedicated exclusively to the study of behavioral economics applied to innovation.

The field of behavioral economics has identified several biases throughout its existence, including loss aversion. Despite this, biases are inevitable. But it is possible to make better decisions using behavioral economics—and neuroscience.

It is essential to emphasize, however, that there are inherent limitations to the proposals outlined in this study. Starting with the criticism of the entrepreneur model presented by Joseph Schumpeter. The main criticisms being: lack of consideration for the influence of the external environment; overemphasis on technology; limitations in the definition of entrepreneurship; unrealistic assumptions about the competition; and limited focus on the role of government [19].

While behavioral genetics has contributed to the understanding of human behavior, it has also been criticized for its oversimplification, confirmation bias, lack of regard for the environment, ethical concerns, and incomplete understanding of heredity [20].

Epigenetics is a fascinating research area that offers possibilities to improve our understanding in many fields of biology and medicine. However, it is crucial to remain constructively skeptical of overstatements and recognize that the interpretation of epigenetic data can be complex and ambiguous. Therefore, it is important that epigenetic studies are conducted with methodological rigor and that their results are interpreted with caution.

Some of the main criticisms of memetics include the lack of solid empirical evidence, the lack of conceptual clarity, the difficulty in isolating cultural units, the lack of regard for context, and the risk of cultural reductionism. Critics argue that memetics is a theory with little empirical foundation, unclear, and imprecise in the definition of its concepts, and that often does not consider the social, historical, and cultural context in which ideas and behaviors develop and spread [21].

The main difficulty in carrying out this study was the complexity of the subject in relation to scientific advances in behavioral science. Dealing with so many topics proved to be a challenge, absolutely necessary, for the development of a framework on the subject of prospect theory as an analytical basis for the decision of risk and uncertainty in innovation.

*Innovation and Entrepreneurship: The Role of Prospect Theory in Decision-Making DOI: http://dx.doi.org/10.5772/intechopen.111396*

Nevertheless, it is important to leave clues for future investigations. As follows:


In short, innovation brings with it risks that can generate negative effects and loss aversion. However, Schumpeterian entrepreneurs seem always willing to take risks, which gives them a competitive advantage over other would-be innovators. How people deal with risk and uncertainty can be influenced by genetic and epigenetic mechanisms, which affect gene expression and human behavior. The dissemination of ideas and behaviors in a society is also greatly influenced by cultural factors. Entrepreneurs can use memetics and organizational culture to create a culture that promotes solutions for dealing with loss aversion in innovative projects. In addition, an effective technique for dealing with risk is choice architecture, which alters behavior in predictable ways without prohibiting choice. In short, while the risks associated with innovation cannot be eliminated, the tactics and strategies mentioned in this text can help entrepreneurs manage them more effectively.
