Escalating Commitment to Unprofitable Projects: Replication and Cross-Cultural Extension
Posted: 13 Jan 1997
Date Written: July 1996
In the current era of intensifying competition and globalization, two increasingly important management issues are how to ensure timely responses to threats and opportunities, and whether management practices need to be modified for application in diverse national settings. This study contributes insights into both questions by testing the effects of initial responsibility, framing of economic information, and national culture, on people's choice between continuance and abandonment of unprofitable projects.Experimental data from 189 U.S. and Chinese nationals showed no significant effects due to responsibility, and only moderately significant effects due to framing. There was a significant cultural effect with the latter having a substantially greater preference for project continuance. This last finding is attributed to the higher collectivism of Chinese culture, Chinese nationals have a greater aversion to admitting failure. They also provide support for the proposition that the design of management systems needs to consider the employees' cultural values.
JEL Classification: M49, F00
Suggested Citation: Suggested Citation