Influence of Decision Responsibility and Consequence on Escalation of Commitment in Corporate Investment

Abstract

The study examined decision responsibility (high versus low) and decision consequence (positive versus negative) on escalation of commit ment. The study utilized a 2 X 2 factorial experimental design. Participants were 348 Banking and Finance graduate students randomly selected and assigned to four treatment groups. Escalation of Co mmit ment was in two forms : Intent to Escalate Co mmit ment (IEC), measured with a standardized scale and Escalat ion of Co mmit ment Behaviour (ECB), measured by the amount of money a decision maker is willing to invest in a business scenario. Results of 2 X 2 (ANOVA), revealed that decision responsibility (DR) and decision consequence (DC) had significant main effects on ECB. The interaction effects of both variables showed that ECB was highest under low decision responsibility and positive decision consequence condition. Only decision responsibility had significant main effect on IEC. IEC positively influenced ECB. Importance of decision responsibility has imp lication for escalation of co mmit ment. It is therefore reco mmended that management should be tactical in engaging individuals with decision responsibility in decision making involving in itial loss.