Doubling Down in Hollywood: Escalation of Commitment in the Product Launch Stage

Abstract

Limitations of the escalation of commitment literature include (1) examining hypothetical, typically unfinished projects, (2) using a limited set of predictor variables, and most importantly (3) ignoring whether the factors that drive escalation or the escalation behavior itself can turn failing projects into successes. We address these shortcomings by focusing on product development projects where escalation opportunities emerge in the product launch stage rather than the development stage. Using data from over 1100 Hollywood films, we identify 467 films that can be deemed as failing, and then examine the role that project, structural, social, and psychological determinants exert on escalation (expenditures made after the film opens poorly at the box office). We then examine whether escalation and these determinants lead to better final box office numbers. Our results question the common assumption that escalation is always a bad strategy, and we identify conditions under which escalation may be most prudent.