Professor to Study Impact of Scarcity on Financial Decisions

In modern economies, the birth and growth of young firms play a large role in job creation and economic welfare. The cost of failure is significant not only to owners and their families but also to employees, suppliers, financial institutions and the Canadian economy as a whole. Understanding entrepreneurs’ decision-making mechanisms and cultivating sound practices are thus crucial. 

Telfer professor Miwako Nitani has received a Social Sciences and Humanities Research Council of Canada Insight Grant for a project titled “Scarcity and Financial Decisions: Necessity and Opportunity Entrepreneurs.” 
 

What is this research project about?

For Nitani, historical approaches to financial decision-making have focussed on the provision of knowledge and cognitive biases. However, recent theoretical literature suggests that individuals’ cognitive capability and executive control in using knowledge they have acquired and making appropriate decisions could be significantly impeded when facing scarcity (defined as “feelings of having less than they need”).

Nitani will examine the link between scarcity and decision-making. She’ll also compare the impact of scarcity on two minority groups among the self-employed, necessity and opportunity entrepreneurs, which differs significantly between the two.

Research Impact

Nitani is among the first to examine the impact of scarcity on entrepreneurial activities. She hopes to enrich public discourse, improve public policy and inform remediation by agencies such as the Business Development Bank of Canada, the Financial Consumer Agency of Canada and other business advisory services.