Journal of Business & Economic Policy

Understanding Resistance to Change as Loss Aversion and Prospect Theory
Gerald E. Evans, Michael G. Evans

Abstract
Individuals within organizations tend to resist change. This behavior is critical when leaders attempt to move groups and organizations through strategic change. A new way to understand this resistance is through Prospect Theory and the idea of loss aversion. Loss aversion asserts that individuals will resist changes to the status quo if the current situation is satisfactory to them. A sample of respondents affirmed the predictions of Prospect Theory in this regard. Individuals who perceived that the current status served them well and met their current needs were less likely to embrace or support proposed changes to the status quo. This perception demonstrates risk aversion to potential losses. Conversely, individuals who perceived that the current state did not serve them well or meet their current needs and interests were more likely to embrace and support proposed changes to the status quo demonstrating risk seeking in the face of potential gains. The results were applied to organizational leadership and management as well as to changes in policy in both the public and private sector.

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