PROJECT ESCALATION AND SUNK COSTS - A TEST OF THE INTERNATIONAL GENERALIZABILITY OF AGENCY AND PROSPECT THEORIES

Previous North American research suggests that aspects of agency theor y and prospect theory may explain decisions to escalate commitment to failing projects, This study explores the universality of these theori es in this context, The willingness of North American and Asian manage rs to escalate commitment to losing projects was measured using four g o/no-go decision cases. We hypothesized that Asian managers would be l ess willing to act in their self-interest (a lower agency effect), and would be more willing to escalate a decision in the face of negative framing (a stronger framing effect), We found that agency theory had s trong explanatory power for project escalation decisions in North Amer ica, but no explanatory power in our Asian sample, Framing effects wer e significant in both, but they were not significantly different.