The Impact of Sole and Joint Responsibility on Managers’ Escalation of Commitment to Unprofitable Projects: An Experimental Investigation

Abstract

This chapter addresses the criticisms that escalation of commitment research has focused only on individual (as opposed to team or group) decision-making. It has been suggested that research findings of individual-based decision on managers’ escalation behaviors may not be applicable in today’s business environment which is increasingly dominated by team or group-based decision. Specifically, this chapter examines the effects of information availability (public vs. private information) and type of responsibility (sole and joint responsibility) on managers’ project evaluation decisions. A laboratory experiment was conducted to test the hypotheses developed for this study. The results indicate that, consistent with prior research, project managers exhibited a greater tendency to continue a failing project under private information than public information conditions. In addition, in the private information condition, project managers with joint responsibility for an investment project expressed a greater tendency to continue a failing project than those with sole responsibility. Implications of our results for the design of management control systems are discussed.

Citation

Chong, V.K. and Wan, M. (2014), "The Impact of Sole and Joint Responsibility on Managers’ Escalation of Commitment to Unprofitable Projects: An Experimental Investigation", Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 17), Emerald Group Publishing Limited, Leeds, pp. 31-56. https://doi.org/10.1108/S1475-148820140000017000