Past success makes leaders escalate commitment into ventures they should abandon.

Evidence

Andy Grove’s direct involvement in a PC-based videoconferencing venture (called ProShare), for instance, made it difficult for the middle-level executive in charge to develop a strategy that was appropriate for the new business and to act in accordance with an objective analysis of the situation. Grove’s strategic intent for ProShare supports Audia et al.’s (2001) suggestion that success may increase a decision maker’s feelings of self-efficacy and introduce an element of complacency that is best understood in terms of the strength of the decision maker’s beliefs in the validity of the current strategy. It also supports Miller’s (1994) finding that decision-making styles tend to be more ‘extreme’ during periods following success than during periods following poor or mediocre performance. Grove eventually came to realize this, but his strong involvement early on, before major market and technical uncertainties had been reduced, led to premature commitment of significant amounts of corporate resources. Once the CEO had committed to the new business it was difficult to avoid escalation of commitment and to scale down or extricate the company from the failing business. — Georg Schreyögg and Jörg Sydow, The Hidden Dynamics of Path Dependence, 1134

Categorization

• XREF: Cuts across the behavioral decision literature on escalation of commitment and self-efficacy — a specific CEO-level case. — connects to: Organizations survive by abandoning goals that threaten their existence — Robert B. McCalla, NATO’s persistence after the cold war, 66
• SEED: Angle: how a founder-CEO’s halo over a pet project inoculates a doomed venture from internal dissent.