IDEAS home Printed from https://ideas.repec.org/a/eee/advacc/v29y2013i1p161-169.html
   My bibliography  Save this article

The moderating effects of national culture on escalation of commitment

Author

Listed:
  • Salter, Stephen B.
  • Sharp, David J.
  • Chen, Yasheng

Abstract

This study tests the cross-cultural sensitivity of three determinants of escalation of commitment: agency conditions, negative framing, and self-justification. A multiple-case experiment, using a sample of 1208 managers and MBA students surveyed over several years in nine countries investigated the moderating effects of national culture. We find that the effect of negative framing on escalation of commitment is significant, but unaffected by differences in national cultures. The adverse selection problem arising from agency predictions has a stronger effect in high-individualism countries than in low-individualism countries, and managers in higher long-term orientation countries are more likely to escalate projects with potential long-term payoffs.

Suggested Citation

  • Salter, Stephen B. & Sharp, David J. & Chen, Yasheng, 2013. "The moderating effects of national culture on escalation of commitment," Advances in accounting, Elsevier, vol. 29(1), pages 161-169.
    • Handle: RePEc:eee:advacc:v:29:y:2013:i:1:p:161-169
    DOI: 10.1016/j.adiac.2013.02.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0882611013000023
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.adiac.2013.02.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael A Witt & Gordon Redding, 2009. "Culture, meaning, and institutions: Executive rationale in Germany and Japan," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(5), pages 859-885, June.
    2. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    3. David J Sharp & Stephen B Salter, 1997. "Project Escalation and Sunk Costs: A test of the International Generalizability of Agency and Prospect Theories," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(1), pages 101-121, March.
    4. Kathryn Kadous & Lisa M. Sedor, 2004. "The Efficacy of Third†Party Consultation in Preventing Managerial Escalation of Commitment: The Role of Mental Representations," Contemporary Accounting Research, John Wiley & Sons, vol. 21(1), pages 55-82, March.
    5. Glenn Hoetker, 2007. "The use of logit and probit models in strategic management research: Critical issues," Strategic Management Journal, Wiley Blackwell, vol. 28(4), pages 331-343, April.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Harrison, Graeme L. & McKinnon, Jill L., 1999. "Cross-cultural research in management control systems design: a review of the current state," Accounting, Organizations and Society, Elsevier, vol. 24(5-6), pages 483-506, July.
    8. Baiman, Stanley, 1990. "Agency research in managerial accounting: A second look," Accounting, Organizations and Society, Elsevier, vol. 15(4), pages 341-371.
    9. Salter, Stephen B. & Sharp, David J., 2001. "Agency effects and escalation of commitment: do small national culture differences matter?," The International Journal of Accounting, Elsevier, vol. 36(1), pages 33-45, February.
    10. Kanodia, C & Bushman, R & Dickhaut, J, 1989. "Escalation Errors And The Sunk Cost Effect - An Explanation Based On Reputation And Information Asymmetries," Journal of Accounting Research, Wiley Blackwell, vol. 27(1), pages 59-77.
    11. Whyte, Glen, 1993. "Escalating Commitment in Individual and Group Decision Making: A Prospect Theory Approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 54(3), pages 430-455, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Schneider, Claudia R. & Fehrenbacher, Dennis D. & Weber, Elke U., 2017. "Catch me if I fall: Cross-national differences in willingness to take financial risks as a function of social and state ‘cushioning’," International Business Review, Elsevier, vol. 26(6), pages 1023-1033.
    2. Alejandro Montecinos‐Pearce & Pablo Rodrigo & Ignacio J. Duran, 2020. "When is escalation of commitment unstoppable in group settings? An iterative economic modeling approach to unveil the dark side of group decision‐making," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1387-1402, December.
    3. Björn Röber, 2020. "Escalating internationalization decisions: intendedly rational, but only limitedly so?," Business Research, Springer;German Academic Association for Business Research, vol. 13(2), pages 455-484, July.
    4. Driouchi, Tarik & Trigeorgis, Lenos & So, Raymond H.Y., 2020. "Individual antecedents of real options appraisal: The role of national culture and ambiguity," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1018-1032.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salter, Stephen B. & Sharp, David J., 2001. "Agency effects and escalation of commitment: do small national culture differences matter?," The International Journal of Accounting, Elsevier, vol. 36(1), pages 33-45, February.
    2. Duxbury, Darren, 2012. "Sunk costs and sunk benefits: A re-examination of re-investment decisions," The British Accounting Review, Elsevier, vol. 44(3), pages 144-156.
    3. Daniel Friedman & Kai Pommerenke & Rajan Lukose & Garrett Milam & Bernardo Huberman, 2007. "Searching for the sunk cost fallacy," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 79-104, March.
    4. C. Chang & Sin-Hui Yen, 2007. "The Effects of Moral Development and Adverse Selection Conditions on Managers’ Project Continuance Decisions: A Study in the Pacific-Rim Region," Journal of Business Ethics, Springer, vol. 76(3), pages 347-360, December.
    5. Niklas Kreilkamp & Sascha Matanovic & Maximilian Schmidt & Arnt Wöhrmann, 2023. "How executive incentive design affects risk-taking: a literature review," Review of Managerial Science, Springer, vol. 17(7), pages 2349-2374, October.
    6. Haka, Susan F. & Heitger, Dan L., 2004. "International managerial accounting research: A contracting framework and opportunities," The International Journal of Accounting, Elsevier, vol. 39(1), pages 21-69.
    7. Bonner, Sarah E. & Sprinkle, Geoffrey B., 2002. "The effects of monetary incentives on effort and task performance: theories, evidence, and a framework for research," Accounting, Organizations and Society, Elsevier, vol. 27(4-5), pages 303-345.
    8. O'Connell, Vincent & Lee, Jong-Ho & O'Sullivan, Don, 2018. "The influence of CEO equity incentives on licensing," European Management Journal, Elsevier, vol. 36(2), pages 266-277.
    9. Peter Gordon Roetzel & Burkhard Pedell & Daniel Groninger, 2020. "Information load in escalation situations: combustive agent or counteractive measure?," Journal of Business Economics, Springer, vol. 90(5), pages 757-786, June.
    10. Schultz, Joseph Jr. & Lopez, Thomas J., 2001. "The impact of national influence on accounting estimates: Implications for international accounting standard-setters," The International Journal of Accounting, Elsevier, vol. 36(3), pages 271-290, September.
    11. Goodell, John W., 2019. "Comparing normative institutionalism with intended rationality in cultural-finance research," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 124-134.
    12. Jörn Hendrich Block & Andreas Thams, 2007. "Long-Term Orientation In Family And Non-Family Firms: A Bayesian Analysis," SFB 649 Discussion Papers SFB649DP2007-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    13. Carolin Bock & Maximilian Schmidt, 2015. "Should I stay, or should I go? – How fund dynamics influence venture capital exit decisions," Review of Financial Economics, John Wiley & Sons, vol. 27(1), pages 68-82, November.
    14. Wu, Jianfeng & Tu, Rungting, 2007. "CEO stock option pay and R&D spending: a behavioral agency explanation," Journal of Business Research, Elsevier, vol. 60(5), pages 482-492, May.
    15. Yusuf, Fatima & Yousaf, Amna & Saeed, Abubakr, 2018. "Rethinking agency theory in developing countries: A case study of Pakistan," Accounting forum, Elsevier, vol. 42(4), pages 281-292.
    16. Joep P. Cornelissen & Rodolphe Durand, 2014. "Moving Forward: Developing Theoretical Contributions in Management Studies," Journal of Management Studies, Wiley Blackwell, vol. 51(6), pages 995-1022, September.
    17. Meloria Meschi & Carla Pace, 2012. "Accounting for Behavioral Biases for Non-biased Demand Estimations," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Multi-Modal Competition and the Future of Mail, chapter 24, Edward Elgar Publishing.
    18. Guedes, Jose & Parayre, Roch, 1997. "Managerial reputation and divisional sell-offs: A model and empirical test," Journal of Banking & Finance, Elsevier, vol. 21(8), pages 1085-1106, August.
    19. Peter A. F. Fraser‐Mackenzie & Tiejun Ma & Ming‐Chien Sung & Johnnie E. V. Johnson, 2019. "Let's Call it Quits: Break‐Even Effects in the Decision to Stop Taking Risks," Risk Analysis, John Wiley & Sons, vol. 39(7), pages 1560-1581, July.
    20. Elizabeth Krauter & Herbert Kimura & Leonardo Fernando Cruz Basso, 2004. "Criação De Valor Através Da Estratégia De Procrastinação," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 092, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:advacc:v:29:y:2013:i:1:p:161-169. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/advances-in-accounting/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.