Together on the path to construction innovation: yet another example of escalation of commitment?

ABSTRACT Collaborative innovation projects are projects in which firms join forces to cooperate in the development and commercialization of a new building product, system, or service. They represent an example of the type of inter-firm relationships that are said to enhance construction innovation. Organizational behaviour research, however, suggests that firms participating in such innovation projects run the risk of escalating commitment and may continue to invest for irrational reasons. It is therefore relevant to examine whether Dutch firms that invest, in collaboration with other firms, in the development and commercialization of a new building product, system, or service are susceptible to this escalation. Two escalation effects were investigated: the effect of expected loss of sunk costs, and the effect of perceived project stage. A survey was undertaken of 154 firms participating in 25 collaborative innovation projects. The results suggest that firms in the population under study are unlikely to fall victim to either of the two escalation effects. Rather, the negative association found between the expected loss of sunk costs and likelihood of continuing investment raises the question as to whether firms become more cautious when they have spent a lot.