Is Escalation Always Irrational?

TLDR

Escalation research attributes persistent investment in failing projects to cognitive biases such as self‑justification and irrational risk taking, framing the phenomenon as a breakdown of rationality. The study seeks to demonstrate that decision failures may stem from rationality itself, revealing what existing escalation theories overlook. The authors analyze the collapse of the 500‑million‑dollar Project Taurus IT venture as a case study.

Abstract

The escalation literature focuses upon unwarranted persistence with failing ventures. Escalation theory suggests that persistence may be prompted by individuals attempting to conceal their mistakes. In other words, the assumption is that a breakdown in rationality stems from irrational risk taking. This paper is less concerned with what such theories reveal about escalation, and more with what they obscure. More specifically, the present study seeks to demonstrate that decision fiascoes may partly stem from rationality itself. The demonstration utilizes a case study of project Taurus, 500 million IT venture which collapsed. Whereas the literature highlights the role of individual cognition in explaining escalation and failure, the present study focuses upon the contradictions surrounding the venture. Escalation is seen in the unfolding of the destructive logic of the situation, and, in what Ritzer calls, 'the irrationality of rationality'.