Continuing Investment Under Conditions of Failure: A Laboratory Study of the Limits to Escalation

Previous research has indicated that escalating commitment occurs early in the process of continuing investment but disappears quickly. Drawing on a related area of research, this article suggests that continuing financial support of a failing investment involves two distinct stages. Although escalation occurs during the first stage of investment, a process of de-escalation may be typical later on. Attribution theory provides a theoretical basis for this postulated sequence of escalation followed by de-escalation. One hundred business students participated in a laboratory experiment designed to test for limiting factors in the process of escalation. The empirical results of this study supported the hypothesized de-escalation process and showed that the availability of alternative investments also limited escalation. Furthermore, a survival analysis of subject investments suggested that commitment may not be the dominant process in escalation and de-escalation. The implications of these findings for future escalation research are discussed.

[1]  Barry M. Staw,et al.  The Trapped Administrator: Effects of Job Insecurity and Policy Resistance upon Commitment to a Course of Action. , 1979 .

[2]  Barry M. Staw,et al.  Knee-deep in the Big Muddy: A study of escalating commitment to a chosen course of action. , 1976 .

[3]  A. Bandura.  Social learning theory , 1977 .

[4]  B. M. Staw.  The Escalation of Commitment To a Course of Action , 1981 .

[5]  P. Tannenbaum,et al.  Theories of cognitive consistency: a sourcebook. , 1968 .

[6]  Joel Brockner,et al.  Factors affecting entrapment in waiting situations: The Rosencrantz and Guildenstern effect. , 1975 .

[7]  L. Festinger,et al.  A Theory of Cognitive Dissonance , 2017 .

[8]  Barry M. Staw,et al.  Commitment in an experimenting society: A study of the attribution of leadership from administrative scenarios. , 1980 .

[9]  Joel Brockner,et al.  The role of modeling processes in the “knee deep in the big muddy” phenomenon , 1984 .

[10]  B. Weiner,et al.  A theory of motivation for some classroom experiences. , 1979, Journal of educational psychology.

[11]  Gregory B. Northcraft,et al.  Dollars, Sense, and Sunk Costs: A Life Cycle Model of Resource Allocation Decisions , 1984 .

[12]  Joel Brockner,et al.  Factors affecting entrapment in escalating conflicts: The importance of timing☆ , 1982 .

[13]  C. Kiesler.  The psychology of commitment : experiments linking behavior to belief , 1971 .

[14]  H. Kelley.  The processes of causal attribution. , 1973 .

[15]  Joel Brockner,et al.  Face-Saving and Entrapment , 1981 .

[16]  Barry M. Staw,et al.  Escalation: The Determinants of Commitment to a Chosen Course of Action , 1977 .

[17]  Barry M. Staw,et al.  New Directions in Organizational Behavior , 1976 .

[18]  B. Skinner.  Contingencies Of Reinforcement , 1969 .

[19]  Edward J. Conlon,et al.  The moderating effects of strategy, visibility, and involvement on allocation behavior: An extension of Staw's escalation paradigm. , 1980 .

[20]  N. Singpurwalla,et al.  Methods for Statistical Analysis of Reliability and Life Data. , 1975 .

[21]  H. Kelley.  Causal schemata and the attribution process , 1972 .

[22]  Barry M. Staw,et al.  Commitment to a Policy Decision: A Multi-Theoretical Perspective. , 1978 .

[23]  Lyman W. Porter,et al.  Managerial attitudes and performance , 1968 .