Academic journal article Journal of the Association for Information Systems

The Role of Evaluability Bias and the Fairness Effect in the Escalation of Commitment to Troubled Software Product Development Projects

Academic journal article Journal of the Association for Information Systems

The Role of Evaluability Bias and the Fairness Effect in the Escalation of Commitment to Troubled Software Product Development Projects

Article excerpt

1 Introduction

New software product development is a critically important business process because it can lead to products that can help companies gain a competitive advantage by setting a new industry trend or creating a new niche market. Despite its potential returns, new software product development is not without risk. One significant risk is that decision makers can become overly committed to troubled product development projects (Biyalogorsky, Boulding, & Staelin, 2006; Boulding, Morgan, & Staelin, 1997)-a phenomenon known as escalation of commitment (Brockner, 1992; Staw, 1976, 1981). Prior research on new product development has shown that decision makers often fail to terminate or adequately redirect a new product development project despite negative signs and instead choose to invest additional resources into the troubled project (Biyalogorsky et al., 2006; Boulding et al., 1997; Keil, Depledge, & Rai, 2007; Schmidt & Calantone, 2002). For example, when a competitor has already introduced a new product that is reportedly superior to a product under development, it may make sense to redirect or terminate the project rather than to invest additional resources to complete and launch the product (Arkes & Blumer, 1985). Failing to redirect troubled projects can lead to a significant waste of organizational resources and may adversely affect the company in other ways.

Due to its significant implications in new product development settings, escalation of commitment has attracted interest among both marketing and information systems (IS) researchers (Biyalogorsky et al., 2006; Keil et al., 2007; Schmidt & Calantone, 2002). However, our understanding of what drives escalation in new software product development is quite limited. Moreover, while prior IS research has identified several factors that promote escalation in IT projects (e.g., sunk cost and personal responsibility), it has failed to leverage the context of software product development, which can include evaluating attributes of a software product under development. When software product development projects go awry, evaluation of the software product's attributes is one input that decision makers can use to judge the ultimate viability of such a product and whether it makes sense to continue the project as planned. Therefore, in this study we focus on a decision bias that we call evaluability bias, which is associated with evaluating a software product' attributes, and investigate how it influences escalation of commitment in the context of software product development. Evaluability refers to the relative ease with which an attribute can be evaluated in relation to other attributes (Bazerman & Moore, 2013). When a decision maker is presented with a software product having two attributes and one of these is easier to evaluate than the other, this can result in evaluability bias, meaning that the easy-to-evaluate attribute dominates the evaluation of the software product (i.e., the more difficult-to-evaluate attribute is neglected). Thus, the decision maker will perceive the software product to be attractive when the easy-to-evaluate attribute carries a superior value.

The context of software product development also frequently involves personal financial rewards that are tied to a successful product launch. For example, at the outset of a project, the project manager might receive the promise of a financial reward for successfully launching a new product. Prior research on judgment and decision-making has found that people tend to favor a reward payoff structure that is perceived as being fair (Bazerman, White, & Loewenstein, 1995), a phenomenon that we call the fairness effect. Therefore, in this study we also aim to investigate the impact of the fairness effect on escalation of commitment in the context of software product development.

Software product development represents a novel context in which to study escalation and by leveraging two features that are germane to this context, we are able to contribute to both the IS literature and the escalation of commitment literature, as escalation scholars have not previously investigated the impact of evaluability bias or the fairness effect. …

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