۱- Introduction

۲- Theoretical development and hypotheses

۳- Mixed-methods approach

۴- Discussion, conclusion, and future research

References

Abstract

Escalation of commitment, defined as the continuation in a failing course of action, is a persistent problem for decision makers in business markets, especially those involved in new product development (NPD). To address this issue, we use Anticipated Regret Theory to develop a model and then empirically test it to demonstrate how forward-looking emotions can lead decision makers to continue failing NPD projects in business-to-business (B2B) markets. We recognize that there are two countervailing types of anticipated regret (i.e., keep regret and drop regret) and test both in our model by adopting a mixed-methods empirical approach. In a quantitative study, a total of 280 subjects completed a NPD decision-making exercise in which various antecedents of persistence with a losing new, business-to-business NPD project were examined. The results suggest that anticipated drop regret plays a significant role in commitment to a failing course of action, whereas anticipated keep regret actually reduces commitment. In a second, qualitative study, twenty experienced NPD professionals operating in high-technology, B2B markets were interviewed either in-person or by telephone. The results suggest that anticipated drop regret is a more serious problem than anticipated keep regret, supporting the quantitative study.

Introduction

Business markets have been characterized by a rapid pace of technological and market change and widespread turbulence due to everchanging customer needs and intense competition (Langerak and Commandeur, 1997; Liang, Sudhir, and Cherian, 2014). A key source of competitive advantage in such markets is new product development (NPD) which has been found to be crucial to the long-term success of business-to-business (B2B) firms (Nijssen and Frambach, 2000). In fact, empirical evidence reveals that higher performing B2B firms derive almost half of their sales and profits from new products they introduced within the last five years (Hutt and Speh 2013). However, NPD is expensive and time-consuming and also suffers from a high failure rate which can have a debilitating impact on organizations (Schmidt et al. 2009). Research shows that about 40% of all new products fail in the market causing significant losses to firms, and ony about one-in-five new products meet annual profit objectives (Cooper 2012). Amidst several determinants of new product failure such as flawed products, incorrect market research, poor screening, and commercialization issues, a significant contributor to new product failure in business markets is escalation of commitment (Boulding et al. 1995; Liang, Sudhir, and Cherian, 2014; Schmidt and Calantone 1998). An escalation of commitment (hereafter escalation) situation has certain defining characteristics: (1) an initial investment of resources such as money, time, and effort into a course of action; (2) negative feedback about the future prospects of that course of action; (3) the possibility to withdraw or continue the chosen course with further investment of resources; (4) uncertainty about the consequences of these actions (Lehenkari 2012). Escalation is typically exhibited through the decision to ignore or distory negative information (Lee, Wong, and Ellick, 2015). Escalation can lead to substantial losses in resources, time, and opportunities and can be particularly disastrous for firms in B2B markets that require fast reactions and quick adaptability (Biyalogorsky et al. 2006).