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Delayed Project Terminations in the Venture Capital Context: An Escalation of Commitment Perspective

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Delayed Project Terminations in the Venture Capital Context: An Escalation of Commitment Perspective

4.85 76,875 ratings · 7,228 reviews
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Overview: Venture capital plays an important role in the entrepreneurial process of providing financing and management support to young, rapidly growing companies. While venture capital investment success stories such as those of Microsoft, Apple and Google are well known, such „home runs" are rather rare. Many investments provide little or no return so that accurately evaluating the prospects of portfolio companies and terminating further engagement in unsuccessful ventures in time is key to the overall portfolio performance of venture capital firms. When venture capitalists act rationally it should be expected that investment terminations are neither systematically premature nor systematically delayed. However, recent studies have discovered a systematic tendency toward delayed project terminations of unsuccessful investments that cannot be reconciled with a model of rational decision making. The present study examines such delayed project terminations in the venture capital industry and investigates whether escalation of commitment may provide an appropriate perspective on the phenomenon and contribute to its explanation. The study develops a comprehensive theoretical framework that synthesizes and integrates several economically irrational drivers of project escalation. A large scale survey among European venture capitalists provides the basis for the empirical analysis of the hypothesized relationships. The analysis yields valuable new insights into the interaction of different escalation drivers, which are much more intertwined than previously supposed by the literature, and permits to suggest effective escalation countermeasures for practice. The considerations and findings of the study are generalizable beyond the venture capital context to a wide variety of settings in which organizations routinely make sequential investment decisions.

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Published November 15, 2010
ISBN 14640809
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Dominik Steinkühler
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Dominik Steinkühler
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Dominik Steinkühler is a writer and avid reader based in the Pacific Northwest. Before pursuing writing full-time, they spent over a decade working in education. When not working on their next book, Dominik Steinkühler can usually be found hiking with their dog or trying out new coffee shops in their neighborhood.

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A profoundly satisfying read. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An absolute must-read for connoisseurs of the genre.
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Absolutely brilliant. The prose is exquisite. It’s accessible yet undeniably sophisticated. I will undoubtedly revisit this masterpiece.
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Masterpiece from start to finish. The prose is exquisite. It’s accessible yet undeniably sophisticated. I will undoubtedly revisit this masterpiece.
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Exceeded all my expectations. The pacing was impeccable and the characters felt incredibly authentic. I was completely immersed. Worth every moment spent reading.
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Honestly one of the most premium reading experiences lately. The author orchestrated a breathtaking finale. Truly a work of art. An absolute must-read for connoisseurs of the genre.
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Exceeded all my expectations. I became deeply invested in the protagonist's journey. A masterclass in storytelling. I am now a lifelong fan of this author.
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Such a rich narrative. I became deeply invested in the protagonist's journey. A masterclass in storytelling. I will undoubtedly revisit this masterpiece.
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A profoundly satisfying read. I became deeply invested in the protagonist's journey. A masterclass in storytelling. An absolute must-read for connoisseurs of the genre.
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Such a rich narrative. The prose is exquisite. It’s accessible yet undeniably sophisticated. Worth every moment spent reading.
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Masterpiece from start to finish. I adored how the story unfolded. It kept me captivated without sacrificing elegance. I am now a lifelong fan of this author.
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Absolutely brilliant. It strikes a perfect harmony of dialogue and world-building. Every chapter felt necessary. An absolute must-read for connoisseurs of the genre.
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