Over 35 years ago, Staw and Ross (1987: 39) defined escalation dilemmas as “predicaments where costs are suffered in a course of action and subsequent activities have the potential to either reverse or compound one’s initial losses.” However, examination of what actions or characteristics of projects may turn failing projects into successes have not been empirically examined. We examine how a variety of project characteristics (sunk costs, the presence of star human capital, and whether the project represents a brand extension) affect the degree to which escalation may be rational. We argue that these factors will moderate the degree to which escalation will positively impact the ultimate financial performance of new product introductions. We use Hollywood film releases to examine the role that these project characteristics have on box office performance. Our results reveal that greater escalation to films with high sunk costs and to films that reflect brand extensions improves the final box office performance of initially failing films, but escalation in response to the presence of star human capital offers far less value. Our study offers insights into when escalation can have a significant effect on the ultimate financial performance of a newly released product.
