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Dominant Logic, Decision-making Heuristics and Selective Information Processing as Antecedents to Financial Escalation of Commitment in Small Family Firms

Woods, Jeremy A
http://orcid.org/0000-0002-1462-7117
http://rave.ohiolink.edu/etdc/view?acc_num=ucin1439301333

Abstract Details

2015, PhD, University of Cincinnati, Business: Business Administration.
The tendency of decision-makers to “stay the course” and continue with a course of action that is failing to accomplish optimal financial results is a phenomenon known as financial escalation of commitment. Persevering with an initially unsuccessful course of action sometimes leads to eventual financial success, but it often leads to chronic financial under-performance and/or bankruptcy. It is surprising how often different decision-makers facing the same type of decision – subject to the same constraints and privy to the same information – come to different conclusions about what course of action is most likely to produce optimal financial results. This research presents new empirical results which help to explain why some small family firms are more profitable than others. It elucidates five specific cognitive biases inherent when using a representativeness heuristic (closed-mindedness, insensitivity to base rate frequency, over-weighting of isolated positive/negative information, preference for redundant indicators, and insensitivity to mean regression) which lead decision-makers to persist with financially sub-optimal courses of action. It provides evidence that involvement with industry associations mitigates this negative financial performance – a major contribution to the family firm governance literature. Perhaps of greatest interest to family business scholars and practitioners alike, it shows that, if decision-makers can look beyond maintenance of the loyalty of their key customers, the non-financial goal of maintaining ownership, control, and family involvement also produces above-average financial results.
Charles Matthews, Ph.D. (Committee Chair)
Alan Lee Carsrud, Ph.D. Ec.D. (Committee Member)
Joshua Clarkson, Ph.D. (Committee Member)
Thomas Dalziel, Ph.D. (Committee Member)
Business Administration
Family Business; Decision-Making; Behavioral Strategy; Entrepreneurship Cognition; Escalation of Commitment; Small Business

Recommended Citations

Citations

  • Woods, J. A. (2015). Dominant Logic, Decision-making Heuristics and Selective Information Processing as Antecedents to Financial Escalation of Commitment in Small Family Firms [Doctoral dissertation, University of Cincinnati]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=ucin1439301333

    APA Style (7th edition)

  • Woods, Jeremy. Dominant Logic, Decision-making Heuristics and Selective Information Processing as Antecedents to Financial Escalation of Commitment in Small Family Firms. 2015. University of Cincinnati, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=ucin1439301333.

    MLA Style (8th edition)

  • Woods, Jeremy. "Dominant Logic, Decision-making Heuristics and Selective Information Processing as Antecedents to Financial Escalation of Commitment in Small Family Firms." Doctoral dissertation, University of Cincinnati, 2015. http://rave.ohiolink.edu/etdc/view?acc_num=ucin1439301333

    Chicago Manual of Style (17th edition)

ucin1439301333
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© 2015, all rights reserved.
This open access ETD is published by University of Cincinnati and OhioLINK.