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

Advances in Accounting Behavioral Research

ISBN: 978-1-78350-445-9

ISSN: 2040-7246

Publication date: 22 August 2014

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.

Keywords

Acknowledgements

Acknowledgments

We would like to thank Khondkar Karim, James (Chong M.) Lau, Lokman Mia, Donna Schmitt (the Editor), two anonymous referees as well as participants at Griffith University, The University of Western Australia, the 2008 EAA Annual Conference, 2009 AFAANZ Annual Conference for their comments and suggestions on the earlier drafts of this manuscript. We would like to also thank Rindah Suryawati for her assistance in data collection. This project was funded by a research grant from the School of Economics and Commerce at the University of Western Australia.

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, Bingley, pp. 31-56. https://doi.org/10.1108/S1475-148820140000017000

Publisher

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Emerald Group Publishing Limited

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