What explains managers’ escalating behaviors in a failing NPD project? The impact of managerial perceptions of opportunities and threats in a stage-gate process

ABSTRACT

Drawing on recent advancement in behavioral decision-making theory and the escalation-of-commitment literature, we examine how managers’ perceptions of threats and opportunities in the external environment may shape their decision to escalate investment in a failing new product development (NPD) project. We test our theoretical model with two studies: first, a behavioral decision-making experimental study with a sample of 128 managers; and, second, an interview study with 12 managers. Our results show that managers’ perceptions of environmental opportunities and business threats significantly shape their decision to escalate commitment and that the impact of such managerial perceptions on escalating tendency is contingent on the stage of the innovation process.

KEYWORDS:

• Escalation of commitment
• stage-gate system
• managerial perceptions
• behavioral decision-making
• new product development (NPD) project

Notes

¹ The wording in the experiment was adapted from prior studies (Behrens & Ernst, 2014; Boulding et al., 1997; Schmidt & Calantone, 2002), and is available on request.

² The authors would like to thank one of the reviewers for pointing out this future research direction.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71602163,71802077,71972065]; Young Scientists Fund of the National Natural Science Foundation of Hunan Province China [2019JJ50059].