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Public justification and investment in failing projects: the moderating effect of optimistic outcome expectations

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Abstract

Public justification can have both desirable and undesirable effects. One dysfunctional consequence demonstrated via laboratory experiments is an increase in the escalation of commitment (i.e., public justification increases investment in failing projects). Based on survey data from 247 failed company projects, this study provides supporting evidence of the escalation-increasing effect of public justification. Thus, the results support the external validity of prior findings.

In addition, this paper hypothesizes and confirms a negative moderating effect of optimistic outcome expectations on the relation between public justification and investments. Specifically, for low optimistic outcome expectations, public justification increases investments in failing projects. In contrast, in cases of highly optimistic outcome expectations, public justification does not further increase investments in failing projects.

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