Abstract
Drawing on prospect theory, we examine how ex-military executives show different risk-taking behaviours in two important areas of decisions in the domestic and foreign markets, focusing on domestic innovation and overseas expansion activities. Given the importance of personal honour in military service, we extend the prospect theory by shifting our attention from the prior focus on financial wealth to intangible wealth, as an important factor to explain the risk-taking behaviours of ex-military executives. Further, we examine how the risk-taking behaviours of ex-military executives are changed in family firms, which also values intangible wealth. Based on the dataset of Chinese listed firms over 12 years, our findings suggest that ex-military executives exhibit risk-seeking behaviours in domestic innovation decisions and risk-averse behaviours in overseas expansion decisions. However, the risk-taking behaviours of ex-military executives are significantly different in family firms, showing the opposite risk-taking preferences.