32 research outputs found
Turnover by Non-CEO Executives in Top Management Teams and Escalation of Commitment
No full textThis article investigates the relationship between the decision-making bias known as escalation of commitment and the turnover of non-CEO executives in top management teams. The phenomenon of escalation of commitment is observed when decision makers persist with business investments that have a low likelihood of success. Theoretical explanations for the association between executive turnover and escalation include self-justification and reputation protection. Top managers may conceal prior errors, escalate commitment to earlier decisions, and exit the organization before the outcome of decisions is observed. Successor managers do not have a commitment to earlier decisions and have the capability to stop investments that are discovered to be failing. Empirical analysis utilizing a sample of over 1600 U.S. firms confirms that departures by non-CEO executives from top management teams are associated with an increased likelihood of new reporting of discontinued operations and extraordinary items by firms and a reduction in the firms’ performances relative to their industry. These effects reflect de-escalation activities and are amplified in the years concurrent with and following a joint departure of multiple management team members. Prior empirical studies on escalation and de-escalation behavior focused on CEO turnover. The contribution of this article is its documenting of the key role of non-CEO managers and team turnover in the context of escalation
Analyzing Corporate Social Responsibility, CEO Gender, and Compensation Structure: Evidence from U.S. Firms
No full textThis article examines how CEO compensation structure and CEO gender were associated with corporate social responsibility (CSR) performance in U.S. firms in the period between 2003 and 2013. Building on prior research in economics, finance, accounting, and management, which suggests gender differences in commitment to CSR, this study provides empirical evidence that female CEOs were positively associated with higher CSR performance. The analysis further shows that a higher proportion of equity in CEO compensation was positively associated with CSR, whereas higher proportions of cash bonuses and long-term incentive plans were negatively associated with CSR. Notably, a higher proportion of a cash bonus in CEO compensation further reduced CSR in firms led by female CEOs. These findings offer valuable insights for firms seeking to design executive compensation packages that align CEO behavior with the firms’ CSR objectives. This study contributes to the growing body of literature on CSR by providing empirical evidence on the role of CEO gender and compensation structure
Escalation of commitment and information security: theories and implications
No full text
Purpose
This study aims to explore the challenges that the escalation of commitment poses to information security.
Design/methodology/approach
Two distinct scenarios of escalation behavior are presented based on literature review. Psychological, organizational and economic theories on escalation of commitment are reviewed and applied to the area of information security.
Findings
Escalation of commitment involves continuation of a course of action after receiving negative information about it. In the information security compliance context, escalation affects a firm when an employee decides to break the firm’s information security policy to complete a failing task. In the information security investment context, escalation occurs if a manager continues investment in policies and solutions that are ineffective because of psychological, organizational or economic factors. Both of these types of escalation may be prevented with de-escalation techniques including a change in management or rotation of duties, monitoring, auditing and governance mechanisms.
Practical implications
Implications of escalation of commitment behavior for information security decision-makers and for future research are discussed.
Originality/value
This study complements the literature by establishing the context of escalation of commitment in decisions related to information security and reviewing managerial and economic theories on escalation of commitment.
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Economic studies in project escalation and project selection
No full textEscalation is generally defined as continued commitment of resources following negative feedback. Chapter 1 presents a literature review. In Chapter 2, a principal-agent model of asymmetric information uses escalation behavior to link managerial turnover and project outcomes. Managers escalate to conceal mistakes and protect reputation. Turnover serves to prevent the revelation of mistakes and to avoid punishment. The model is tested using a large current dataset with the data on managerial turnover and project discontinuations. Evidence is found that turnover among top executives significantly increases the likelihood that the firm subsequently discontinues operations. Length of tenure at firm is found to reduce escalation. Results on the effect of the specific reasons for managerial departure on the project discontinuations are reported. Chapter 3 focuses on the role of adoption reversibility and switching costs in technology adoption patterns in the presence of network externalities and uncertainty. Network externalities exist when a product\u27s benefits include the intrinsic payoff and a payoff from the network of other adopters. Irreversible adoption gives advantage to the safer tested technology. Choosing the untested technology creates the risk of being stranded without a network of followers if the payoff is inferior. In the case of low switching costs, the adoption is reversible and the gain of sampling from risky distributions first is observed. Chapter 4 views escalation through real option theory. The model yields behavior consistent with case study evidence. It makes escalation a product of solely the objective project characteristics. A project with negative “myopic” NPV may be beneficial for the firm once the option value of continuing for one more period and making the stopping decision later is incorporated into the analysis. Chapter 5 applies bandit process studies to the issue of information technology project failures. The bandit perspective shows that managers choosing a risky project with high potential reward before a safer one are behaving in the firm\u27s interest. A high proportion of risky projects adopted leads to a high number of project failures. The bandit approach supports escalation prevention studies that advocate evaluating decision-makers on the basis of their decision processes, rather than specific outcomes
Rational Escalation: The Real Option Perspective
No full textEscalation is generally defined in investment context as continuation of an investment project after receiving negative signals about the outcome. This study demonstrates that under conditions of uncertainty about project outcome there is a rational incentive for the manager to continue a project to receive more information. Taking this real option on continuing the project has value for the firm. Simulations results from the option value model of investment demonstrate that likelihood of escalation is higher when signals have higher quality which increases the value of getting an additional signal. Likelihood of escalation also increases when the prior expectation of success is low, and when project termination cost is low. Continuing the project to receive additional information is shown to be more profitable than the simple net present value rule that excludes option value. The model implies that escalation may be value-maximizing for the firm, and managers should not automatically be discouraged to continue a project when new signals about its success may appear in the future
Teaching Economics With Case-Based Learning and Problem-Based Learning
No full textWe explore the impact of two active learning methods – case-based learning (CBL) and problem-based learning (PBL) – and summarize our experiences using these methods in an applied managerial economics course. Our empirical analysis evaluates cognitive, affective, and behavioral dimensions of learning. In the cognitive category, analysis of student exam performance on topics covered by either CBL or PBL demonstrates improvements compared to topics covered only in traditional lectures. In the affective category, which focuses on student satisfaction, and the behavioral category, which concerns student skills, survey evidence demonstrates a positive impact of active learning
On the role of switching costs and decision reversibility in information technology adoption and investment
No full textABSTRACT Managerial decisions on the adoption of innovative technologies by a firm are made under conditions of uncertainty and must account for network externalities that imply the benefit of a technology is received not only from its intrinsic payoff, but also from the size of the network of other adopters. The theoretical model presented in this study demonstrates that for firms evaluating information technology investment with network effects key determinants of the technology selection pattern are adoption reversibility and switching costs. If switching costs are sufficiently high to make technology adoption irreversible then safer established technologies have an advantage as choosing a riskier untested technology opens the firm to the risk of being stranded without a network of followers. With lower switching costs, the technology adoption decision is reversible which provides an advantage to riskier untested technologies. A discussion of empirical evidence on adoption patterns in information technology provides application for the theoretical model
On the Role of Switching Costs and Decision Reversibility in Information Technology Adoption and Investment
No full textThe Image of fallen women in the domestic literature and publicism: to the background
No full textВ статье выявлены традиции в изображении падшей женщины в отечественной литературе: от «Пригожей поварихи» М. Д. Чулкова до «Припадка» А. П. Чехова. Автор показывает трансформацию образа падшей женщины в литературе и современной газетно-журнальной публицистике.The article revealed a tradition in the depiction of a fallen woman in the domestic literature: from M. D. Chulkov to A. P. Chekhov. The author shows the transformation of the image of a fallen woman in literature and modern publicism
Escalation of commitment and CEO departures: theory and evidence
No full textThe escalation of commitment process involves a decision-maker continuing commitment to an investment after receiving negative information. This study develops a principal-agent model to explore how escalation decisions are linked with departures of CEOs from the position. With asymmetric information, a CEO has an incentive to conceal prior decision errors by escalating commitment to failing investments and leaving the firm before the outcome of investment decisions is disclosed publicly. Results of empirical analysis based on a sample of over 3,000 US firms are consistent with the theory and demonstrate that firms’ reporting of low financial performance relative to their industry as well as initiation of new discontinued operations are preceded, and not followed, by unplanned CEO departures
