Identifying the main Factors influencing the Formation of the escalation of commitment Bias in Entrepreneurs: a Grounded Theory Approach

Entrepreneurial decisions are one of the main factors contributing to their capability in bringing about innovation and creating value. A lot of researches have concluded that entrepreneurs do not necessarily follow rational decision making processes and are prone to decision making biases which have various effects on their enterprises. Escalation of commitment is one of the main biases among human beings as well as entrepreneurs, making them stick to their decisions and sealing the fate of their enterprises. This paper tends to study the main factors contributing to the genesis of escalation of commitment in entrepreneurs by a qualitative study and using grounded theory. According to our findings based on 22 interviews with Iranian techno-entrepreneurs, feeling responsibility and the need to save face as causal conditions, environmental pressures, limitations and complexity as intervening, and confidence, self efficacy , risk taking, optimism and experience as contextual are the main factoring leading to escalation of commitment bias among entrepreneurs. This bias makes the entrepreneur allocate more resources to his (her) decisions and leading to either failure or success (in fulfilling his or her decisions).