CISEG Working Papers Series
Centre for Innovation Systems, Entrepreneurship and Growth, Jönköping International Business School
Escalation of Commitment in Investment Decisions: The Role of Emotions under Uncertainty
() and Veronica Gustavsson
Abstract: The purpose of this study is to better understand whether
emotional aspects affect entrepreneurs’ and owner-managers’ decisions in
investment situations when escalation of commitment can be observed and
where the level of uncertainty was also added to the emotional aspect. The
study was performed using conjoint analysis (a.k.a stated preference
technique) and yielded following results: positive emotions
(self-confidence, challenge, and hope) increase the decision-maker’s
propensity to escalate commitment. Negative emotions (embarrassment and
strain) do not, on the other hand, make the entrepreneur prone to escalate.
The result remains the same for all positive emotions where an increasing
level of uncertainty tends to make the entrepreneur more prone to escalate.
Strain and embarrassment, under high uncertainty, decrease the tendency to
escalate. All results are significant except for frustration that does not
show any significant relationship. The combination of cognitive decision
theories and emotional theories enhances our knowledge about the emotive
side of entrepreneurs’ motives to escalate. The results also enable us to
supplement and refine existing theories on self-justification.
Keywords: Emotions; Escalation of commitment; Uncertainty; Entrepreneurs; (follow links to similar papers)
JEL-Codes: M19; (follow links to similar papers)
20 pages, December 5, 2008
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