Escalating Commitment to Unprofitable Projects: Replication and Cross-Cultural Extension

Posted: 13 Jan 1997

See all articles by Chee W. Chow

Chee W. Chow

San Diego State University

Paul Harrison

Federal Reserve Board - Division of Research & Statistics

Timothy Lindquist

University of Northern Iowa

Anne Wu

National Chengchi University (Taipei)

Date Written: July 1996

Abstract

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

Chow, Chee W. and Harrison, Paul and Lindquist, Timothy and Wu, Anne, Escalating Commitment to Unprofitable Projects: Replication and Cross-Cultural Extension (July 1996). Available at SSRN: https://ssrn.com/abstract=2853

Chee W. Chow

San Diego State University ( email )

San Diego, CA 92182-0763
United States

Paul Harrison (Contact Author)

Federal Reserve Board - Division of Research & Statistics ( email )

20th and C Streets, NW
Washington, DC 20551
United States
202-452-3637 (Phone)
202-452-3819 (Fax)

Timothy Lindquist

University of Northern Iowa ( email )

Cedar Falls, IA 50614
United States

Anne Wu

National Chengchi University (Taipei) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei 11623
Taiwan

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