Commitment escalation is a frequent phenomenon in real life, and how to manage it has frequently attracted scholars’ attention. Staw and Ross (1987) proposed the commitment escalation model to explain the causes of commitment escalation behavior as well as ways to eliminate the problem. Staw and Ross (1987), however, only briefly describe methods to reduce commitment escalation, and do not describe the causal relationships with treatments or their contents. The present study uses the commitment escalation model proposed by Staw and Ross (1987) as a basis for analyzing and proposing mechanisms that may cause commitment escalation when a principal authorizes a manager to execute a project.
This paper assumes that the contents of the project proposal drawn up by the manager are based on complete information symmetry between the principal and the manager. In addition, when the principal is able to observe the environment conditions and the manager’ effort during project execution, the project can achieve the proposed outcomes. The results of this study show that when executing the project, if the principal is not willing and/or is unable to assess the proposal, this will produce subsequent “commitment escalation” behavior in manager.
When the principal is able to participate in the execution and management of the project, the principal assesses the proposal before the execution of the first stage of the project, and his or her awareness of the environment conditions will affect the manager’s optimal effort. If the principal’s awareness of the environment changes, this is due to changes in the actual environment conditions. If the actual environment conditions in the first stage improve/worsen, the manager’s optimal effort will decrease/increase. If the changes in the principal’s awareness are caused by changes in his or her level of involvement, when the environment conditions during the first stage are better than those in the proposal, the greater the principal’s capacity to control a project the less effort the manager needs to devote. When the environment conditions are worse than those in the proposal, the greater the principal’s capacity to control a project the more effort the manager must devote.
In terms of the principal’s level of involvement, under a situation of favorable environment conditions in the first stage, the project can be completed smoothly according to the proposal, and the principal does need not intervene excessively.
When environment conditions are poor, however, manager will automatically increase the effort they devote at the cost of reduced rewards to avoid the loss of reputation from a failed project, so that the principal does not need to increase his or her level of involvement. In addition, the more the principal understands that the environment conditions are favorable, the less effort the manager will be willing to devote. If the awareness of the principal’s increases so he or she understands that the environment conditions are poor, and is willing to invest project funds according to the proposal, although the manager will reduce his or her effort, his or her rewards and utility will also increase.
When a milestone is reached, the principal makes an assessment as to whether the project should continue to the second stage, and is concerned about how to control commitment escalation behavior in manager if the project is facing poor environment conditions. From our discussion we found that if the project faces poor environment conditions, the manager will reduce his or her effort, while the principal will reduce his or her level of involvement and increase the manager’s authority. This may reduce the manager’s utility and increase his or her responsibility, meaning that the manager is not willing to risk the execution of the second stage of the project. In addition, the principal can strengthen his or her capacity to control the project and increase his or her awareness of the environment, thereby increasing the manager’s effort and utility, reversing the negative influence of the manager taking responsibility for project failure in the case that the manager controls the project. Therefore, if the principal can increase the accuracy of his or her evaluation of the actual environment conditions, while also strengthening his or her ability to control the project, he or she can effectively constrain possible “commitment escalation” behavior from the manager during the execution of the project.
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