Escalation of commitment tendency is one of the most widely researched topics in management accounting. To date, prior research has attempted to identify various factors that can trigger this tendency (e.g. [Harrell and Harrison, 1994], [Kanodia et al., 1989] and [Schulz and Cheng, 2002]). Our study extends this line of research by proposing that obedience pressure is a factor that can induce managers' escalation behavior. A number of researchers have identified the importance of these social issues in shaping the ways the agent and the principal interact and behave in the organization (see e.g. [DeZoort and Lord, 1994] and [Lord and DeZoort, 2001]). Apart from obedience pressure, this study also examines whether the authoritarian personality of project managers affects their decisions when faced with obedience pressure.
The statistically significant difference of the mean responses of project managers who experience obedience pressure versus those who do not, as stated in hypothesis H1, is consistent with previous findings (e.g. [DeZoort and Lord, 1994] and [Lord and DeZoort, 2001]). This result reveals that the presence of inappropriate commands from the superior articulated into obedience pressure is also found to be a significant determinant of the project managers' decision to escalate their commitment to a failing project. Furthermore, consistent with the theoretical prediction in H2, the finding suggests that the impact of obedience pressure on project managers' escalation behavior is more prominent in a situation in which the information about the project's future unprofitability is only privately available. Although to some extent the willingness of project managers to escalate commitment under a condition of public information results from obedience pressure, the need to preserve their reputation coupled with the possibility of public censure, which might occur as a result of the information being publicly available, tend to reduce the impact of this pressure. The latter also hints at the interesting notion whereby project managers express a willingness to reach a compromise zone (middle point) in order to simultaneously protect their reputation and bow to obedience pressure imposed by higher authority. This finding is in accordance with (McNair, 1991) and (Lord and DeZoort, 2001) studies, which suggested that auditors tend to stay in a grey zone to deal with conflicting goals by trading off choices to obtain a neutral position.
It is interesting to note that the linked theoretical predictions (e.g. Hypotheses 3 and 4) surrounding the role of project managers' authoritarian personality and information availability under a condition of obedience pressure are also supported. The results show that low authoritarian project managers exhibit a tendency to escalate commitment regardless of the extent of obedience pressure (H3). This result lends support to DeZoort and Lord (1994, p. 9) who argue that low authoritarian individuals are reluctant to deal with situational and interpersonal factors such as "authority-based instruction" unnecessarily. Hence decisions made by low authoritarian individuals would be heavily reliant on their autonomous feelings and values and what they perceive to be correct and appropriate. They also tend to use self-rationalization in the pursuit of their self-interest. Thus when faced with obedience pressure in public information conditions, they are not likely to escalate their commitment since their self-rationalization suggests to them that by doing so they will further damage their reputation. However, when facing obedience pressure in a condition of private information, their self-rationalization suggests that they use this momentum, since the decision to go with the flow may protect their reputation.
In addition, the results reveal that high authoritarian project managers exhibit a tendency to escalate commitment when they are subject to the presence rather than absence of obedience pressure (H4). This result is consistent with (Chenhall, 1986), (DeZoort and Lord, 1994) and (Sanford, 1956) contentions that high authoritarian project managers are more responsive to obedience pressure than low authoritarian project managers, since the former tend to prefer relationships based on power and the influence of authority and feel less responsibility for actions performed. Thus these project managers tend to be more agentic and place the obligation to obey an instruction of a legitimate authority before their own self-interest, i.e. the need to protect their own reputation.
A number of limitations should be noted in this study. First, this study relied on an experimental method to examine the effects of obedience pressure and availability of information variables on managers' project evaluation decisions. The case materials used reflect a simplified business world situation. Therefore, care should be taken in generalizing the findings from this study. Second, most of the studies on the escalation of commitment, which relied on agency theory as the basis for their theoretical framework, have considered only one simple principal-agent model. This model has been criticized for its simplicity and narrowness ([Indjejikian, 1999] and Noreen, 1988 E. Noreen, The economics of ethics: A new perspective, Accounting, Organizations and Society (1988), pp. 359–370.[Noreen, 1988]). Future research should address more complex relationships involving multi-principals and multi-agents. Notwithstanding the aforementioned limitations, this study has improved our understanding of the relationship between agency theory and obedience pressure, including the importance of the personal attitudes of the project managers involved. More importantly, this study has improved our knowledge of the factors that can trigger project managers' commitment escalation behaviors, which carries with it important implications for the development of effective management control systems.
Acknowledgements
We gratefully acknowledge the helpful comments and suggestions from Graeme Harrison and Chong Lau, as well as seminar participants at Australian National University, Macquarie University, 2007 AFAANZ Conference and 2007 EAA Conference. This project was funded by a research grant at the UWA Business School, The University of Western Australia.
