The cognitive antecedents of go/stop decisions in a failing new product development project

Abstract

This study highlights managers’ perception of organizational environment as an important structural determinant of escalation of commitment in a new product development (NPD) setting. We connect escalation behavior literature with behavioral decision-making theory, and argue that managers’ perception of organizational environment as a threat or an opportunity may stimulate them to further continuing the investment in an NPD project in the face of negative consequence. We test our hypotheses in a behavioral decision- making experiment with 200 managers. While prior escalation behavior research focus on project-related information and decision maker’s personal bias, this study focuses on the impact of organizational contexts (e.g., firm performance and business environment). Empirical results show that escalating tendency is increased by managers’ perception of environmental opportunity, critical threat and performance-reducing threat.