Abstract Purpose: This study examines the causality relationship between framing effect and the escalationof commitment in Small Medium Enterprises (SMEs). Design/methodology/approach: The design of this study is a 1x2 laboratory experiment involving 60 bandeng presto (pressure-cooked milkfish)SMEs in Semarang, Central Java, Indonesia. The independent variable is the framing effect which consists of two levels, information with positive framing and information with negative framing. The dependent variable is the escalation of commitment as measured by investment decision, on a scale of 10 to 100. The framed information concerns SMEs’ investment plan in the procurement of production equipment. The information with positive framing was in the form of investment cases stated with definite profits while the information with negative framing was in the form of cases with definite losses. Findings: The results indicated that the subjects in the investment case which was positively framed, namely the existence of a profit, would definitely make the decision to stop the investment. Conversely, subjectsin the investment case which was negatively framed would experience an escalation of commitment because they opted to continue the investment, even though they were certain to suffer losses in the future. Practical implications: With the results of this study highlighting that the framing of information can influence SMEs’ investment decisions, the Institute for managing SMEs can take SMEs’ beahviour as an aspect of fostering and directing future efforts of the SMEs. Originality/value:Research on the escalation of commitment is usually carried out in the context of the company but this study specifically focused on SMEs alone.
Volume 12 | 06-Special Issue
Pages: 58-69
DOI: 10.5373/JARDCS/V12SP6/SP20201007