When and How Cognitive Biases Enhance Project Investment Decisions

Project investment decisions (i.e., selecting which project proposals to fund) are critical for project and organizational success, because poor decisions can lead to wasted resources, missed opportunities, diminished competitiveness, and ultimately project failure. Literature identifies cognitive bias (e.g., optimism, escalation, anchoring, and overconfidence bias) as a key factor that hinders project investment decision-making. However, we argue that cognitive bias can also have positive effects on the quality of these decisions. We interviewed 15 project practitioners and surveyed 101 managers to uncover when cognitive biases enhance project investment decisions and how. We found recency bias is a key cognitive bias that enhances project investment decision quality, because in contemporary dynamic project environments reliance on the latest, contextually relevant information becomes particularly valuable. We contribute to the project management literature by explaining how cognitive biases can have both beneficial and detrimental effects on project decision-making.