Is there any resolution on this? I ran into the same error.
In our scenario, we applied full control permissions all the way through "C:\Windows\system32\cmd.exe" for the account that was being used for installation and that did the trick. We initially had the required permissions in place but some reason they were overwritten and we had to assign them explicitly. From the error It appears that the installer was trying to execute the command 'initdb.exe' from the cmd line but the account used for installation itself didn't had required permissions on cmd.exe. Let us all know how it goes for you.
I had this error in a customer.
I workarounded it taking a backup, clean uninstalling, installing the latest 8.1 patch and restoring the backup.
Hope it helps.
I know this is an older post that may not need an answer, but for any future viewers, the error is resolved by following the steps in this Knowledge Base article: