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What Keeps Managers Away from a Losing Course of Action? Go/Stop Decisions in New Product Development
Author(s) -
Behrens Judith,
Ernst Holger
Publication year - 2014
Publication title -
journal of product innovation management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.646
H-Index - 144
eISSN - 1540-5885
pISSN - 0737-6782
DOI - 10.1111/jpim.12100
Subject(s) - action (physics) , business , escalation of commitment , investment (military) , process (computing) , product (mathematics) , new product development , test (biology) , face (sociological concept) , investment decisions , marketing , operations management , process management , public relations , economics , computer science , finance , political science , microeconomics , sociology , behavioral economics , social science , mathematics , biology , operating system , paleontology , geometry , quantum mechanics , physics , politics , law
The purpose of this experimental study is to test whether specific approaches can reduce escalation of commitment—namely, decision‐makers' tendency to persist with an innovation project despite negative feedback that the initial investment has not reached its goals. This study focuses on the decision process for 137 research and development managers who must decide whether to abandon previously chosen courses of action or to continue in the face of probable and increasing losses in a stage‐gate system. The results show that visual decision aids and consultant advice reduce managers' decisions to continue funding a losing course of action. The results also show that using both approaches simultaneously has the strongest effect. Finally, the study reveals that the escalation of commitment issue can be reduced more effectively before an innovation project is commercialized while using both approaches.