Escalation of commitment : Comparing the U.S. and Chinese hospitality managers in term of national culture, view of business ethics, and agency condition

No business is free from taking a risk. Escalation of commitment (EoC) in large and risky projects is a critical component of managerial decision-making behavior that can affect both the growth and profitability of firms. In this study we propose and test how EoC may differ based on antecedents such as differences in national culture, manager’s ethical orientation, and agency conditions. Our empirical analyses examine whether and how hospitality industry managers in China and in the USA differ in their level of EoC. Our results indicate significant differences based on the individualism/collectivism dimension, ethical orientation, and agency conditions. The results show differential effects of the various cultural dimensions on EoC for the American and Chinese hospitality managers. In our study, managers’ views of business ethics and agency conditions were found to be influential factors for the American managers, although not quite relevant for Chinese managers. This result points to the need for developing and refining conceptual and theoretical models that can be applicable to Asian managers to understand decision-making based on cultural and ethical perspectives especially for firms expanding their operations globally in the hospitality industry. So far, research has been conducted on EoC in the hospitality industry. As a proposal for future research, the inclusion of the antecedents such as self-efficacy and locus control and consequences such as firm performance can be implemented for an in-depth understanding of EoC.