Managers who regret abandoning a promising idea may be more likely to keep backing the next underperforming project, according to research due in the October issue of the Journal of Business Research. The result adds a less familiar explanation for why companies sometimes continue spending after the original case has weakened.
The paper by Julian Nickel, Monika C. Schuhmacher and Sabine Kuester separates two kinds of failure. A commission error occurs when a company pursues a project that later fails. An omission error occurs when it rejects or ends an opportunity that later looks successful, perhaps because a competitor has done well with something similar.
Both experiences can leave a mark on the next decision. A manager burned by an expensive flop may become readier to stop another weak project. A manager who feels they cancelled an opportunity too soon may fear doing so again, and may be more willing to approve further spending.
What the researchers tested
The researchers ran two scenario-based experiments with 302 innovation managers. Participants considered fictional automotive projects, first receiving a history in which an earlier decision had produced either a flop or a missed opportunity. They then assessed a separate project that was performing poorly.
Participants who had been presented with the missed opportunity showed a greater tendency to persist with the later weak project than those presented with the flop. The first experiment involved 126 managers. The authors describe the size of the effect as small to moderate, which puts a useful limit on the result: a manager’s earlier experience is one influence among many, not a formula for predicting any individual decision.
The second study examined the thought process behind the response. The authors describe two forms of anticipated regret. A manager may worry about regretting more spending if the project fails, or worry about regretting a cancellation if the project later succeeds. Those concerns point in opposite directions.
Past losses can distort the next review
Economically, the money already spent on a project is a sunk cost. It cannot be recovered, so the decision to invest more should turn on the expected future costs and benefits. In a boardroom, the earlier decision is rarely so easy to set aside.
Ending a project can expose an earlier mistake and force executives to explain it to colleagues, investors or a board. Continuing can preserve the chance, however slim, that the original judgment will eventually be vindicated. That pattern is known as escalation of commitment.
The new study adds a further complication. A manager may appear to be assessing current sales, technical results and costs, while also reacting to a previous decision that concerned a different product. The risk is not simply stubbornness. It is overcorrecting in the opposite direction after a regretted missed chance.
Promotion and prevention focus
The paper also considers regulatory focus, a psychology term for the goals people emphasize when they make choices. Promotion-focused people are more oriented toward gains and opportunities. Prevention-focused people place more weight on responsibilities and avoiding losses.
Among managers with a stronger promotion focus, an earlier missed opportunity was associated with stronger concern about dropping another potentially successful project. The authors did not find that regulatory focus simply determined who would persist. Its effect ran through the type of regret managers expected to feel.
That is a more restrained claim than assigning a fixed personality label to executives. A difficult investment decision may be affected by the project, the evidence, the incentives around the manager and the memory of a prior error.
Give the project a fresh assessment
Companies cannot remove uncertainty from product development. Early setbacks can reflect a flawed product, but they can also be temporary problems with engineering, supply, timing or market adoption. Ending every project at the first disappointment would create a different error.
The case for continuing needs to be stated afresh. What new evidence supports the remaining investment? What has changed since the previous review? What would the company gain by using the same money and people elsewhere?
Independent challenge can help. A 2025 experiment in the Journal of Business Economics found that assigning a devil’s advocate who highlighted negative project information reduced escalation in both open and blame-oriented error-management settings.
Pre-agreed review points can also make a decision less personal. Management can set thresholds for development cost, customer demand, technical performance or timing before a project gets into trouble. A failed threshold does not automatically require cancellation, but it requires a clear new argument for continuing.
The paper’s central warning is not that companies should quit more readily. It is that a previous flop and a previous missed opportunity can pull the next review in different directions. The project on the table still deserves to be judged on its own evidence.
