The role of risk in making decisions under escalation situations

This paper reports on two studies examining the relationship between escalation of commitment and three risk-related variables - risk propensity, risk perception, and outcome expectancy. Results showed that (a) risk propensity and outcome expectancy were positively related to escalation of commitment; whereas risk perception was negatively related to escalation of commitment; (b) risk perception partially mediated the effects of risk propensity, and outcome expectancy mediated the effects of risk perception. These findings are generally consistent with the conceptual framework proposed by Sitkin and Pablo (1992). Implications for risk-taking behavior, escalation of commitment, and practice are discussed.

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