How decision failures shape escalation of commitment: the role of regret and regulatory focus

We investigate how a prior decision failure affects escalation of commitment in subsequent new product development. Distinguishing between commission errors (persisting with failing projects) and omission errors (prematurely abandoning promising projects), we demonstrate their distinct effects on subsequent escalation of commitment across two experimental studies with innovation managers. Study 1 tests the main effect, and Study 2 examines the underlying mechanisms and boundary conditions. Drawing on regret regulation theory and regulatory focus theory, we show that anticipated keep regret, arising from continuing a failing project, and anticipated drop regret, stemming from terminating a promising project too soon, conditionally mediate these effects, depending on decision-makers’ regulatory focus. Commission errors increase anticipated keep regret, reducing escalation among decision-makers low in prevention focus, whereas omission errors heighten anticipated drop regret, increasing escalation among those high in promotion focus.