The relationship between psychological capital and the escalation of commitment in capital project continuation decisions: Empirical evidence from Indonesia

Although many theoretical explanations have been offered to explain the escalation of commitment, there is still a gap in the literature whereby individual variables, as the determinants of the escalation, indicate inconsistent findings. On the other hand, there is an opportunity to explore the role of a new individual variable, namely, Psychological Capital (PsyCap) which is a second-order construct of self-efficacy, hope, optimism, and resilience. This study aimed to analyze how the four variables, both as individual variables and as a second-order construct, predicted the escalation of commitment. As many as 297 business students completed the requested questionnaire. The results showed that self-efficacy, optimism, and resilience have both a significant and positive correlation toward the escalation of commitment. Furthermore, when compared to each of the constituent variables, as a second-order construct, PsyCap, proved to be more capable of predicting the escalation of commitment than its components. The implications of these findings are that PsyCap is not always associated with positive outcomes and, thus, it is crucial for companies to identify the type of personnel to be placed in positions where they will often be involved in decision making.