The Determinants of Escalation of Commitment: National Culture and Experience Effects

32 Pages Posted: 7 Jan 1999

See all articles by David J. Sharp

David J. Sharp

University of Western Ontario - Managerial Accounting and Control Area Group

Stephen B. Salter

Department of Accounting Middle Tennessee University

Date Written: December 1998

Abstract

This study extends previous findings relating to agency (adverse selection) and framing effects on the escalation of commitment to failing projects in which significant funds have already been sunk. We explore the effects of experience and small differences in national culture on managers' willingness to escalate commitment.

Using samples of experienced managers in the USA and Canada, we confirmed previous findings that agency and framing effects were significant in explaining escalation of commitment. We further found that the effect of adverse selection interacts with small differences in national culture. Managers from the more individualistic USA were significantly more likely than Canadians to escalate in the presence of adverse selection conditions. Finally, we found that more experienced managers were less likely to escalate commitment.

JEL Classification: D81, D82, G31

Suggested Citation

Sharp, David J. and Salter, Stephen Brian, The Determinants of Escalation of Commitment: National Culture and Experience Effects (December 1998). Available at SSRN: https://ssrn.com/abstract=141873 or http://dx.doi.org/10.2139/ssrn.141873

David J. Sharp (Contact Author)

University of Western Ontario - Managerial Accounting and Control Area Group ( email )

London, Ontario
Canada
519-661-3945 (Phone)
519-661-3485 (Fax)

Stephen Brian Salter

Department of Accounting Middle Tennessee University ( email )

Box 50 Business and Aerospace N425
1301 East Main
Murfreesboro, TN 37132
United States
(615) 898-2345 (Phone)
(615) 898-5839 (Fax)

HOME PAGE: http://www.mtsu.edu/accounting/faculty.php

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