Escalation of Commitment

Introduction

When a decision maker discovers that a previously selected course of action is failing, she is faced with a dilemma: Should she pull out her remaining resources and invest in a more promising alternative, or should she stick with her initial decision and hope that persistence will eventually pay off? Management scholars have documented a tendency of decision makers to escalate commitment to previously selected courses of action when objective evidence suggests that staying the course is unwise. In these situations, decision makers often feel they have invested too much to quit and make the errant decision to “stick to their guns”. This encyclopedia entry describes the nature of “escalation of commitment”, its most likely causes, decision characteristics that exacerbate its severity, how it can be prevented, and why it is important.

Fundamentals

Escalation of commitment is a risk whenever a decision maker (a) commits resources to a course of action (thereby making an “investment”) in the hope of achieving a positive outcome and (b) experiences disappointing results. Invested resources may take any form from time, money, and labor to mental and emotional energy. For example, an individual risks escalation of commitment across the following diverse circumstances:

 when deciding between committing more money to bail out a foundering start-up versus investing elsewhere

 when choosing between investing in more job training for an underperforming employee versus firing and replacing her

 when weighing whether to invest in marriage counseling versus seek a divorce

While there are many situations where the best course of action is to commit further resources to a failing investment, the term “escalation of commitment” describes only those situations where objective evidence indicates that continuing with an investment is unwise, and yet an individual chooses to invest further in spite of this.

Explanations for Escalation of Commitment...