Escalation bias among technology entrepreneurs: the moderating effects of motivation and mental budgeting

Persisting despite negative feedback is a cognitive bias termed escalation of commitment bias. It can be a useful weakness in the context of technology entrepreneurship, but it can also be very costly. This makes such entrepreneurship a fruitful context for the study of escalation of commitment to its inherent uncertainty, challenge, and trial-and-error decision-making. This study applied expectancy theory to explore commitment escalation as well as the moderating effects of motivation and mental budgeting. It analysed data from the first two waves of the Chinese Panel Study of Entrepreneurial Dynamics. The results indicate that technology entrepreneurs are especially susceptible to escalation bias, and that the relationship becomes stronger when they are intrinsically motivated and have set no mental budget for their venture's activities.