How Venture Team Recommendations Influence Undue Entrepreneurial Persistence: The Impact of Self-Regulation and Experience

Abstract

Persisting with a losing project (i.e., a new product development project facing superior competition) is a social endeavor that can increase the costs of failure to the entrepreneur and other stakeholders. Yet, it tends to be explained almost exclusively in terms of intrapersonal predictors, such as the sunk cost fallacy. This paper examines whether, how, and under which conditions interpersonal influence, such as the intensity of a team’s recommendation to persist with a losing project, encourages entrepreneurs to persist. Drawing from the psychologies of escalation and self-regulation, we build a model of entrepreneurs’ undue persistence that we test through experimental design and conjoint analysis. We find that an entrepreneur’s decision to persist with a losing project is determined partly by the team’s recommendation to persist and that the strength of this effect varies across entrepreneurs based on their self-regulation and experience.