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Title:
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ESCALATION OF COMMITMENT IN NPD AND COST
SAVING IT PROJECTS |
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Author(s):
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Mark van der Pas and Niels van der Pas |
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ISBN:
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978-989-8533-87-6 |
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Editors:
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Miguel Baptista Nunes, Pedro Isaías, Philip Powell, Pascal Ravesteijn and Guido Ongena |
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Year:
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2019 |
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Edition:
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Single |
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Keywords:
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Escalation of Commitment, IT Decision Making, Stage-Gate Process |
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Type:
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Short Paper |
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First Page:
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276 |
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Last Page:
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280 |
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Language:
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English |
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Cover:
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Full Contents:
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click to dowload 
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Paper Abstract:
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Stopping non promising projects as early as possible saves resources that can be allocated to more relevant investments or
be saved to improve the bottom line of an organisation. Gated processes are in use in numerous organisations to decide
on proceeding or cancelling a project. This study examines the consequences of the setup of the gatekeepers, the
managers deciding on the gates, in these processes. Gatekeepers deciding on two consecutive gates are, according to the
escalation of commitment theory, tended to confirm their initial decisions. They hold a higher approval rate for the
consecutive decision as compared to a setup where the gates are approved by different gatekeepers. In this paper we
present the results of, as far as we know, the first natural experiment on the escalation of commitment using 820 new
product development and cost saving IT projects over a time span of 4.5 years. We found empirical evidence that
escalation of commitment, as predicted in theory, leads to a higher approval rate of the consecutive gate. Organisations
can mitigate this by changing the setup of the governance by avoiding the approval of two consecutive gates by the same
gatekeeper. Furthermore, the data showed that large investment projects hold a significantly larger possibility to receive
approvals (after an initial approval) than small investment projects. This indicates the importance of the initial gate
approval. Finally, we studied the difference between cost saving and new product development projects and found no
differences in their mortality rate nor in the approval rate of the consecutive gate. |
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