WHY EVENTUAL “WINNERS” MAY NOT BE PURSUED: THE CONNECTION BETWEEN INNOVATION PROJECT TYPE AND ABANDONMENT ERROR OCCURRENCE

Innovation project termination is inherently uncertain, and firms may sometimes abandon projects that would ultimately have succeeded. We conceptualise such outcomes as abandonment errors and develop a process model explaining how they arise. Specifically, we argue that innovation project type shapes perceived project uncertainty, which influences the extent to which decision-makers rely on rationality and intuition, thereby affecting abandonment quality and, ultimately, abandonment error occurrence. Using survey data on abandoned projects from U.S. managers with innovation decision authority, we find that more exploratory (as opposed to exploitative) innovation projects are perceived as more uncertain and are more likely to be evaluated intuitively. Greater reliance on intuition lowers abandonment quality, whereas a more extensive use of rationality leads to a higher decision quality. However, a higher decision quality is ultimately crucial to decreasing the possibility of abandonment error occurrence. These findings advance research on innovation project termination by showing that abandonment errors emerge not only from project characteristics, but also from how uncertainty is processed in the abandonment decision itself. For managers, the results underscore the importance of structuring evaluations of uncertain projects carefully.