Several case studies have documented myopic allocation of organizational resources among capabilities that payoff in short vs. long-term. We capture a general class of organizational resource allocation problems in a simple model that exhibits the typical worse-before-better dynamics commonly believed to be responsible for persistence of myopic policies. Next we examine the endogeneity of resources and the impact of competitive pressures on the efficiency of allocation policies. Endogenous resources and competition are both shown to significantly shift the optimal allocation towards myopic policies. Short-term policies become beneficial as they strengthen the positive loop between performance, resources, and capabilities. In fact strategic selection of allocation policy in a competitive market can force the firms to allocate all the resources to the short-term capability. These results provide an alternative explanation for the persistence of myopic organizational decision-rules that does not rest on psychological and learning arguments.