Glen Whyte

When success breeds failure: The role of self-efficacy in escalating commitment to a losing course of action

The search for individual differences relevant to behavior in escalation situations has met with little success. Continuing the search, this study investigated self-efficacy judgments as a potentially important individual difference in escalating commitment to a losing course of action. Predictions derived from self-efficacy theory suggest that self-percepts of high efficacy would exacerbate the economically irrational escalation bias whereas self-percepts of low efficacy would diminish it. These predictions were consistently supported in this laboratory study where business students responded to decision dilemmas in which funds had been committed to a failing course of action. Theoretical and practical implications of these findings are drawn for the escalation and self-efficacy literatures.

Diffusion of Responsibility: Effects on the Escalation Tendency

In a laboratory study, the possibility was investigated that group decision making in the initial stages of an investment project might reduce the escalation tendency by diffusing responsibility for initiating a failing project. Support for this notion was found. Escalation effects occurred less frequently and were less severe among individuals described as participants in a group decision to initiate a failing course of action than among individuals described as personally responsible for the initial decision. Self-justification theory was found to be less relevant after group than after individual decisions. Because most decisions about important new policies in organizations are made by groups, these results indicate a gap in theorizing about the determinants of escalating commitment for an important category of escalation situations.

Effect of Self- and Group Efficacy on Group Performance in a Mixed-Motive Situation

The effect of self- and group efficacy on the performance of three-person (N = 26) and seven-person (N = 28) groups on a mixed-motive investment task was investigated. The correlations between group efficacy for making money and the actual amount of money made by the groups were positive and significant. The relation between group efficacy and the groups performance was reciprocal. The results also indicated that members of three-person groups had significantly higher perceptions of group efficacy than members of seven-person groups even though they faced the identical mixed-motive investment task. The correlations between group efficacy and the groups performance were significantly higher than the correlations between aggregated values of self-efficacy for individual performance and the groups performance. Finally, multiple regression analyses showed that self-efficacy for individual performance had a negative effect on the groups performance.

The role of asset specificity in the vertical integration decision

Abstract According to the logic of transaction cost economics, several factors determine the most efficient form of economic organization. These factors include uncertainty and frequency of transactions involving the transfer of goods or services, although the most important factor is asset specificity. These characteristics of transactions engender high transaction costs, but they also parallel the conditions under which the sunk cost effect is most likely to be observed. The potential influence of sunk cost considerations in the choice of corporate governance structure is illustrated with respect to vertical integration, and was tested in a laboratory study in which subjects were asked to play the role of a firms chief strategist. The results support the view that asset specificity drives vertical integration, but for reasons that may have little to do with transaction cost economizing.

Decision failures: why they occur and how to prevent them

Executive Overview Imagine that your companys sole product has recently suffered a considerable market share loss, although it is still the largest selling product of its kind. You are thinking of making a radical change in your product to restore market share to traditional levels, although such a strategy may backfire and ultimately reduce market share even further. Assume an even chance for both events, and potential gains to be equivalent to potential losses. Would you agree to such a change? Now, consider that the product has recently experienced a considerable gain in market share, and is the largest selling product of its kind. You are thinking of making a radical change in your product to further increase market share, although such a strategy may backfire and ultimately reduce market share to its former level. Assume an even chance for both events, and potential gains to be equivalent to potential losses. Would you agree to such a change? Although the choices just described are objectively indis...

Fostering Integrative Thinking: Adapting the Executive Education Model to the MBA Program———

Many full-time MBA programs limit their effectiveness by clinging to functionalism. At best, they have made incremental changes to meet the market demand for MBA graduates. These changes, in most cases, have failed to integrate the various functional facets of complex business challenges. For insights into how to do so, many business schools need look no further than their own executive programs. Executive programs typically emphasize the synergistic use of core competencies and delivery systems in a way that enables one to truly master business administration.

The Effects of Self-Efficacy on Behavior in Escalation Situations

Two experiments were conducted to investigate the hypothesis that perceptions of self-efficacy influence, in various ways, behavior in escalation situations. Self-efficacy beliefs for finding oil were measured for 527 petroleum geologists as they decided, at increasing levels of negative feedback in the form of dry wells, whether to persist with an unproductive venture in petroleum exploration. Experiment 1 employed a within-subject design and found a significant main effect of both negative feedback and initial self-efficacy. Differences in intentions to escalate between low and high self-efficacy individuals were apparent at all levels of negative feedback. No moderating effect of self-efficacy, however, was discernible. Experiment 2 employed a between-subjects design and multiple regression analysis. Like Experiment 1, Experiment 2 revealed a significant main effect of negative feedback and initial self-efficacy. Post-feedback self-efficacy was found to mediate the effects of negative feedback on the escalation tendency. Implications of these results for the self-efficacy and escalation literatures are discussed.

The Influence of a Manager's Own Performance Appraisal on the Evaluation of Others

This study examined the possibility that the performance appraisal process is affected by a pervasive and inherent effect that has heretofore been unidentified. This effect derives from the results of the performance appraisal most recently performed on the manager who subsequently conducts appraisals of others. The nature of this effect was examined in four studies. In a case study, the ratings received by two area coordinators in a university academic department affected their subsequent ratings of faculty. In a simulation, 30 managers received hypothetical feedback regarding their own job performance. The managers subsequently evaluated an employee on videotape. Managers who received positive feedback about their performance subsequently rated the employee significantly higher than managers who received negative feedback regarding their own performance. This occurred despite the fact that the managers knew the evaluation of them was bogus. The results of two follow-up field studies involving 74 manager-employee dyads in a manufacturing company in Canada and 39 manager-subordinate dyads in a retail organization in Turkey are consistent with the view that ones own performance appraisal is related to the subsequent appraisal of ones subordinates. Both anchoring with insufficient adjustment and a mood induction may explain this effect, but the results are more consistent with the former explanation than the latter.

The Role of Leader Hyper Self-Efficacy in Group Decision Fiascoes

Hyper self-efficacy refers to high task-specific efficacy beliefs that markedly exceed capability. When top management teams have leaders with hyper self-efficacy, crucial decisions taken in a rela...