Escalation Of Commitment Research Articles

Does Gender Matter? Cognitive Biases and Entrepreneurial Funding

Entrepreneurial funding plays a pivotal role in new venture growth, however, there is a significant disparity in funding based on gender. We argue that the disparity in funding can be explained by linking cognitive biases with gender-specific expectations in entrepreneurial settings. Using social cognition theory, we examine four cognitive biases: overconfidence, an illusion of control, the ability to generalize from small numbers, and an escalation of commitment. We propose that when male and female entrepreneurs demonstrate these biases, there is a direct relationship to the amount of funding they receive from investors and that this relationship differs based on gender. We conducted mixed methods studies using both content analysis and experiments. Our results suggest that cognitive biases do have differing effects on gender in the context of entrepreneurial funding amounts.

A journey around decision-making: Searching for the “big picture” across disciplines

This paper carries out an interdisciplinary literature review to develop an updated framework that integrates all aspects of decision-making. It proposes a framework that combines the evolutionary perspective with the complexity theory to integrate the ontological communalities between the examined disciplines (operational research, psychology and management). Decision-making is regarded as a systemic, multi-tiered information-based process, founded on the interaction of the decision-maker with the environment in a sort of learning path which co-evolves through variation–selection–retention mechanisms nourished by environmental feedback.Such a complex-coevolutionary perspective provides valuable insights concerning some as-yet-unexplored aspects of decision-making, such as inter- and intra-individual differences in decision-making, as well as the interaction of ‘rational’ and ‘intuitive’ processes or some contradictory evidence (regarding ‘fractionated expertise’ and ‘escalation of commitment’).Practical implications on management education are highlighted, as well as methodological limitations and needs for further studies. The journey is not yet over and probably never will be, but, from an evolutionary perspective, it is the journey, not the arrival, that matters.

That’s why they didn’t let it go: exploring the roots of women entrepreneurs’ escalation of commitment

Purpose Escalation of commitment is one of the most important decision-making biases among entrepreneurs and may deprive them of valuable resources and even result in their eventual failure. Many entrepreneurs become escalated to their ongoing plans by allocating more resources, even after receiving negative feedbacks regarding those plans. Although the escalating behavior is an inherent part of the entrepreneurial cognition, previous studies have mostly ignored its antecedents among entrepreneurs. This dearth of studies is more severe regarding women entrepreneurs, whose biases have rarely been investigated. Therefore, this paper aims to explore the antecedents of the escalation of commitment among women entrepreneurs. Design/methodology/approach To explore the antecedents of the escalation of commitment in women entrepreneurs’ decisions based on their lived experiences, this paper used a narrative inquiry. The data were collected by conducting in-depth interviews with three Iranian women entrepreneurs running small businesses and analyzed by narrative data analysis. Findings According to the findings, bitter memories of previous failures, overconfidence and familial pressure are the main antecedents of the escalation of commitment in women entrepreneurs. Practical implications This study has a very important managerial implication for women entrepreneurs, who should know that while decision-making biases may occur unintentionally, they are able to reduce the harmful effects and enhance the benefits of biases by knowing their most common signs. Originality/value This study is a pioneer in exploring women entrepreneurs’ biases and took a novel approach by conducting a narrative analysis of women entrepreneurs’ escalation of commitment.

De-Escalate Commitment? Firm Responses to the Threat of Negative Reputation Spillovers from Alliance Partners’ Environmental Misconduct

When faced with the threat of negative reputation spillover from an alliance partner accused of environmental misconduct, the focal firm must decide whether to adopt a supportive or non-supportive response. We argue that this decision denotes a commitment escalation dilemma, but that factors previously found to increase escalation tendencies lead to de-escalation in our crisis contagion context. Specifically, we derive four hypotheses from this reverse effect proposition, and test these using a policy-capturing survey targeting Norwegian CEOs. We found that firms are more likely to select an adversary response when the alliance is of high strategic importance and has high termination costs. Conversely, firms are more likely to select an advocacy response when the alliance is of low strategic importance and has low termination costs and when the CEO was not involved in the formation of the alliance. Overall, our study answers a call for a more nuanced understanding of commitment escalation and the theory’s boundary conditions by introducing reputation spillover crisis as a contextual influencer of escalation behavior. It also extends the reputation literature and provides new evidence that reputation concerns can instigate ethical decision-making.

Mindfulness and decision making: sunk costs or escalation of commitment?

Mindfulness is related to a number of positive health outcomes, such as decreased stress, anxiety and improved physical functioning. Recent studies have found that mindfulness is related to a range of cognitive outcomes, including better decision making. In one example, higher trait mindfulness and brief mindfulness inductions are associated with resistance to the influence of sunk costs, where mindful individuals were more willing to discontinue a costly, but disadvantageous, course of action. However, some previous studies examining mindfulness and sunk costs have methodological limitations which make it difficult to determine if mindfulness is specifically related to sensitivity to the sunk cost bias, or rather than to a general willingness to continue an unprofitable course of action (independent of the level of prior investment). The present study extends previous work by replicating the finding that trait mindfulness is positively related to resistance to the effects of sunk costs and also demonstrates that mindfulness is related to reduced escalation of commitment, an individual's willingness to continue their commitment to an unprofitable course of action through the further investment of resources or time. Overall, trait mindfulness was most consistently related to reduced escalation of commitment, whereas the relationship between trait mindfulness and resistance to the effects of sunk costs was less consistently observed.

Information load in escalation situations: combustive agent or counteractive measure?

This experimental study analyzes how a key factor, information load, influences decision making in escalation situations, i.e., in situations in which decision makers reinvest further resources in a losing course of action, even when accounting information indicates that the project is performing poorly and should be discontinued. This study synthesizes prior escalation research with information overload and investigates how different levels of information load influence the escalation of commitment. Our findings reveal a U-shaped effect of information load: When decision makers face negative feedback, a higher information load mitigates the escalation tendency up to a certain point. However, beyond this point, more information reinforces the escalation tendency. Moreover, we find that the type of feedback affects self-justification, and we find a negative and significant interaction between information load and self-justification in negative-feedback cases. Thus, studies investigating escalation of commitment should control for self-justification and information load when utilizing high levels of information load. Finally, in the positive-feedback condition, higher information load encourages decision makers to continue promising courses of action, i.e., increases decision-making performance.

Optimizing Decision-Making Processes in Times of Covid-19: Using Reflexivity to Counteract Information Processing Failures

The effectiveness of policymakers’ decision-making in times of crisis depends largely on their ability to integrate and make sense of information. The COVID-19 crisis confronts governments with the difficult task of making decisions in the interest of public health and safety. Essentially, policymakers have to react to a threat, of which the extent is unknown, and they are making decisions under time constraints in the midst of immense uncertainty. The stakes are high, the issues involved are complex and require the careful balancing of several interests, including (mental) health, the economy, and human rights. These circumstances render policymakers’ decision-making processes vulnerable to errors and biases in the processing of information, thereby increasing the chances of faulty decision making processes with poor outcomes. Prior research has identified three main information processing failures that can distort group decision-making processes and can lead to negative outcomes: (1) failure to search for and share information, (2) failure to elaborate on and analyze information that is not in line with earlier information and (3) failure to revise and update conclusions and policies in the light of new information. To date, it has not yet been explored how errors and biases underlying these information-processing failures impact decision-making processes in times of crisis. In this narrative review, we outline how groupthink, a narrow focus on the problem of containing the virus, and escalation of commitment may pose real risks to decision-making processes in handling the COVID-19 crisis and may result in widespread societal damages. Hence, it is vital that policymakers take steps to maximize the quality of the decision-making process and increase the chances of positive outcomes as the crisis goes forward. We propose group reflexivity—a deliberate process of discussing team goals, processes, or outcomes—as an antidote to these biases and errors in decision-making. Specifically, we recommend several evidence-based reflexivity tools that could easily be implemented to counter these information-processing errors and improve decision-making processes in uncertain times.

Investor’s Intrinsic Motives and the Valence of Word-of-Mouth in Sequential Decision-Making

An escalation of commitment refers to an individual’s decision to engage in greater risk-taking following prior losses than gains. This behavior was found to be preeminent in situations framed as portfolio decisions. However, there is lack of evidence regarding the underlying mechanism behind an individual’s decision to engage in later high (or low) risk-taking in a loss (or gain) domain. A model was developed based on the connections between prospect theory, self-determination theory and word-of-mouth to provide underlying mechanisms that activate investors’ decisions to engage in later high (or low) risk-taking. We theorized that self- and/or social motives and negative word-of-mouth (NWoM) or positive word-of-mouth (PWoM) would double mediate the effect of prior low (high) risk-taking on later high (low) risk-taking in the loss (gain) domain. Results supported a double mediation effect and indicated that investors have different underlying self- and/or social motives, manifested in NWoM or PWoM, that activate later high (low) risk-taking in the loss (gain) domain. The findings have pertinent implications for advisors wishing to understand underlying self- and/or social motives in order to predict and manage client risk-attitude. The findings also help researchers and analysts to identify patterns in investor behavior that can predict market trends.

Improving De-Escalation Strategy: Monitoring Control, Bonus Incentive and Escalation of Commitment

Managers continue to perform irrational behavior by escalating the wrong decision hoping that the situation will change. The irrational escalation of commitment bring negative influences on organization performance. Previous studies have found several mitigation strategies. One of the strategies found is called monitoring control in private information situations. However, this strategy has not considered the agency problem that can occur between owners and managers. For this reason, this study seeks to improve the de-escalation monitoring strategy by adding agency theory. The Experimental method with factorial design of 2x2x2 is applied to answer research problem. The first factor is information (public vs private), the second factor is monitoring control (present vs absent) and the third factor is bonus incentive (present vs absent). The participants in this study were 159 undergraduate students who were taking principles of investment course. The Analysis of Variance (ANOVA) test was conducted. As a result, there are interaction effects from the variables of monitoring control, information availability, and bonus incentive. The interaction effect distinguishes participants in making decisions. Companies can consider giving monitoring control and bonuses together to differentiate managers' decisions when assessing projects. Further study may explore more detail on the bonus procedures with more in-depth bonus mechanism.

Process Accountability as a De-Escalation Technique

Abstract. Escalation of commitment occurs when a course of action is continued despite repeated drawbacks (e.g., maintaining an employment relationship despite severe performance problems). We analyze process accountability (PA) as a de-escalation technique that helps to discontinue a failing course of action and show how time moderates both the behavioral and cognitive processes involved: (1) Because sound decisions should be based on (hopefully unbiased) information search, which requires time to gather, the effect of PA on de-escalation increases over time. (2) Because continuing information search creates behavioral commitment, the debiasing effect of PA on information search diminishes over time. (3) Consistent with the tunnel vision notion, the effects of less biased information search on de-escalation decrease over time.

When a growth mindset can backfire and cause escalation of commitment to a troubled information technology project

AbstractThis research focuses on information technology (IT) project managers' growth mindset concerning IT project management (PM) ability and investigates how such a mindset can promote escalation of commitment to a troubled IT project. Specifically, we suggest that the growth mindset of IT PM ability promotes prospective achievement motivation and can lead IT project managers to escalate their commitment to an IT project despite negative feedback suggesting that the project may not be completed successfully. Through a series of three experiments with 351 IT project managers, we obtained consistent support for our hypotheses suggesting that the growth mindset of IT PM ability promotes IT project escalation and this effect is partially mediated by anticipated regret about project failure and anticipated likelihood of project success. In addition, in the three experiments we found that when the project involves an unfamiliar technology the indirect effect of the growth mindset of IT PM ability through anticipated likelihood of project success is stronger than when the project involves a familiar technology.

Escalation in Failed Military Interventions: Saudi and Emirati Quagmires in Yemen

AbstractExternal interventions are an enduring feature of international relationships. While the causes for interventions have been at the heart of studies on interventions, the dynamics of termination versus escalation have received little attention. This article poses the question: why do intervenors persist in failed military interventions despite diminishing prospects of victory? Whereas some scholars adhered to rational choice approaches, others focused on cognitive and emotional psychology to explain seemingly puzzling decisions at the origin of war continuation. This article builds on the emerging literature on status in IR to unravel the escalation of commitment to a failed war. It argues that when leaders engage their own status and that of their countries to an eventual success in a military intervention, persistence in the war becomes the only solution to salvage their status. Through this lens, this article presents an explanation for Saudi and Emirati escalations in what was planned as a brief operation in Yemen since 2015. Understanding the dynamics of persisting in failed wars has clear implications for the development of international relations theory, the conduct of regional powers in military interventions, and the practice of conflict resolution in the Middle East and beyond.

Pengaruh Adverse Selection Dan Negative Framing Terhadap Eskalasi Komitmen Dalam Pengambilan Keputusan Investasi

Escalation of commitment behavior in investment decision making is an ineffective action by persisting on a project that indicates failure. This study aims to examine whether or not an adverse selection and negative framing effect on the tendency of escalation of commitment. This experimental research uses a 2 x 2 factorial design with an instruments of "PT Kue Hebat" case. Participants were Bachelor Degree of Management students who enrolled in Financial Management subject, as substitute for managers whom are chosen by random assignment technique as much as 50 participants. This study uses two ways ANOVA analysis techniques. The results of the study prove that the project manager will show a tendency to escalate commitment by continuing unfavorable projects in adverse selection conditions or in negative framing conditions.

The Effects of Goal Publicity and Self‐Monitoring on Escalation of Goal Commitment

AbstractThe current research examines whether the public or private nature of consumer goals affects goal‐commitment escalation following initial goal failure. In particular, the authors explore the moderating role of self‐monitoring. Across three experiments, the authors demonstrate that high self‐monitors are more likely to persist following a public failure than a private failure. However, the public versus private nature of the goal failure does not affect low self‐monitors’ persistence. The authors also explore two boundary conditions for this effect by manipulating the timing of feedback and by testing the role of the perceived value of the incentive for achieving the goal. The article concludes with a discussion of theoretical and managerial insights from this work.

The effect of sunk cost, framing effect, and educational background on the escalation of commitment

The purpose of this study is to examine whether negative framing and sunk costs affecting the escalation of commitments with an educational background as moderating variable. The study uses an experimental study approach with 2 x 2 x 2 within-subjects design. There were 39 managers from a state-owned enterprise who participated in this experiment. The result indicates that sunk costs and negative framing effect the escalation of commitment. In contrast, the educational background did not moderate the relationship between sunk cost and negative framing to the escalation of commitment.

Dynamic Sunk Costs: Importance matters when opportunity costs are explicit.

The sunk cost fallacy is a well-established phenomenon where decision makers continue to commit resources, or escalate commitment, because of previously committed efforts, even when they have knowledge that their returns will not outweigh their investment. Most research on the sunk cost fallacy is done using hypothetical scenarios where participants make a single decision to continue with a project or to abandon it. This paradigm has several limitations and has resulted in a relatively limited understanding sunk cost behavior. To address some of these limitations, we created a dynamic repeated choice paradigm where sunk costs are learned over time and opportunity costs are explicit. Over three experiments we show that the sunk cost fallacy depends on the relative a priori importance of the goal being invested in. We observed escalation of commitment only when the sunk cost domain is more important than alternatives (explicit opportunity costs), and participants showed de-escalation of commitment to the sunk costs domain otherwise.

Corporate governance reform in Japan: A behavioral view

Corporate governance reform in Japan was triggered by the introduction of a new corporate governance code in 2015. The code is notable for requiring the addition of two or more independent directors to the boards of listed firms, which previously had consisted largely of internally promoted directors enjoying lifetime employment. Applying the framework of behavioral law and economics, we analyze the change from the two aspects of “offense” and “defense” by the board of directors, meaning, respectively, enhancing the quality of group decision-making by producing collective intelligence, and preventing corporate misconduct by introducing the viewpoints of outsiders. The former is not immune to psychological biases such as groupthink and escalation of commitment, but these can be mitigated by ensuring equal consideration of all participants’ viewpoints, and, notably, the participation of women. The latter is affected by other biases, such as obedience to authority and diffusion of responsibility, but establishing an internal system for reporting misconduct, with outside directors at the top, can be effective if the outsiders’ position is perceived as credible.

Ambiguity attitudes and myopic loss aversion: Experimental evidence using carnival games

A series of tailor made experiments were executed on a representative Indian household sample to investigate the influence of risky and ambiguous options on the choices made by the subjects. The objective of the study was to understand the impact of prior results on subsequent decisions made along with identifying role of demographic factors impacting their choices. The experiment showed that subjects displayed an escalation of commitment while playing the game in domains of losses. The results show that attitude of ambiguity aversion cannot be generalized in totality and role of cultural factors needs to be explored further.

Pengaruh Informasi Investasi Dan Overconfidence Terhadap Eskalasi Komitmen

This study aims to examine the effect of investment information and overconfidence in the commitment escalation. The population in this study were students of the Master Program in the Faculty of Economics, Padang State University. A total of 64 people agreed in this study. The hypothesis of this study is managers who experience negative investment information will tend to escalate commitments than managers who receive positive investment information managers with overconfidence will tend to escalate commitments than managers with underconfidence. Laboratory experiments with a 2 x 2 factorial design were carried out. 64 MM and MPdE students—as proxies of project managers—participate in an experiment. One-way ANOVA is used at Hypothesis test. Results that showed significant investment information on the escalation of commitments with a significance value of the One Way ANOVA analysis test of 0.00 <0.05. Overconfidence does not affect managers' decisions in escalating commitments in this study. The significance value of the One Way ANOVA analysis test was 0.74> 0.05.

Government ’s control rights influence investor’s escalation of commitment in PPP project: Regulating effect of other-face concern

In public–private partnership (PPP) project, government’s control right (GCR) cannot be completely defined by contract information. Government has some advantageous information resources outside of the contract, such as status, supervision level, trust etc. These information lead investors to overestimate the GCR and aggravate the escalation of commitment (EOC), especially for investors who prefer the other-face concern. According to the degree of quantification of information owned by government in a PPP project, the study divided GCR into explicit control rights (ECR) and implicit control rights (ICR). In order to discuss the difference of actions that two types’ control right on investor’s EOC who have other-face concern. The study collected 176 valid data through scenario questionnaires and constructed the structural equation model with regulating effect. After verifying the model with AMOS. We found the ECR influence investor’s EOC significantly, while the ICR does not; the other-face concern only regulate the influence of ICR on investors’ EOC. These findings are helpful to reduce the behavioral risk of investors’ EOC in PPP project.