The Role of Departmental Thought Worlds in Shaping Escalation of Commitment in New Product Development Projects
Alexander Weeth, Jana‐Kristin Prigge and Christian Homburg
Originally published: September 8, 2019 (PDMA JPIM • Vol 37, Issue 1 • January 2020)
Read time: 50 minutes
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The debate over whether and how thought worlds of different departments (especially marketing and research and development [R&D]) affect managers' decision‐making behavior in new product development (NPD) is ongoing. A key challenge of these decisions is to deal with deteriorating NPD projects, which are often subject to escalation of commitment (EoC), with many firms wasting billions of dollars by throwing good money after bad NPD projects. However, understanding departmental thought worlds and their role for EoC in NPD could help firms stop this profusion. Thus, this research provides answers to the question of how thought worlds affect managers' tendency toward EoC in NPD decision‐making—both in general and under certain project characteristics. To do so, we conducted four studies based on real‐life scenarios with 460 highly experienced NPD managers from marketing and R&D, thus ensuring high validity and reliability. Our research is the first to explore the impact of thought worlds on EoC, thereby detecting that the importance of managers' thought worlds for shaping EoC varies with the NPD project's characteristics. Thus, depending on the specific project situation, different types of managers may be more or less capable of making proper NPD decisions. Moreover, results show that belief updating serves as a respective key mediator. Doing so enriches the theory by showing that managers' thought worlds can substantially influence a major mechanism (i.e., belief updating) of coping with cognitive dissonance. Finally, post hoc tests reveal departmental differences in EoC behavior between marketing and R&D that vary with a project's characteristics. These results imply that firms need to carefully consider who is in charge of making decisions on NPD project continuance in different project situations.
- Departmental thought worlds maybe problematic or beneficial for EoC and thus for NPD decision‐making. In general, managers' tendency to continue a failing project diminishes with their increasing strategy and risk orientation but rises with their increasing professional orientation and tolerance for ambiguity.
- The impacts of managers' thought worlds for shaping EoC vary substantially with an NPD project's characteristics. This implies that, depending on the specific project situation, different types of managers maybe more or less capable of making proper NPD decisions.
- In particular, managers with a high risk orientation seem less sensitive toward project characteristics, thus playing a key role with regard to stable and reliable NPD decision‐making. However, the opposite seems to hold true for managers with a high tolerance for ambiguity.
- Thus, firms should foster beneficial thought worlds, while preventing unbeneficial thought worlds through respective training and the adaptation of reward systems. If such specific measures are difficult to implement, we recommend focusing on fostering risk orientation, while preventing tolerance for ambiguity.
- On a general level, marketing and R&D managers escalate their commitment to high degrees. However, marketing managers tend comparably more toward EoC when an NPD project's previous technological investments were low, the cause of its failure is of a technological nature, and its innovativeness is high. In contrast, R&D managers tend comparably more toward EoC when the NPD project's cause of failure is market driven and its innovativeness is low. Thus, firms should carefully consider and adapt their NPD team staffing along the specific project situation.