A cross-cultural study on escalation of commitment behavior in software projects

One of the most challenging decisions that a manager must confront is wheth er to continue or abandon a troubled project. Published studies suggest tha t failing software projects are often allowed to continue for too long befo re appropriate management action is taken to discontinue or redirect the ef forts. The level of sunk cost associated with such projects has been offere d as one explanation for this escalation of commitment behavior. What prior studies fail to consider is how concepts from risk-taking theory (such as risk propensity and risk perception) affect decision makers' willingness to continue a project under conditions of sunk cost. To better understand fac tors that may cause decision makers to continue such projects, this study e xamines the level of sunk cost together with the risk propensity and risk p erception of decision makers. These factors are assessed for cross-cultural robustness using matching laboratory experiments carried out in three cult ures (Finland, the Netherlands, and Singapore). With a wider set of explanatory factors than prior studies, we could accoun t fora higher amount of variance in decision makers' willingness to continu e a project. The level of sunk cost and the risk perception of decision mak ers contributed significantly to their willingness to continue a project. M oreover, the risk propensity of decision makers was inversely related to ri sk perception. This inverse relationship was significantly stronger in Sing apore (a low uncertainty avoidance culture) than in Finland and the Netherl ands (high uncertainty avoidance cultures). These results reveal that some factors behind decision makers' willingness to continue a project am consis tent across cultures while others may be culture-sensitive. Implications of these results for further research and practice are discussed.