negative feedback on its likely outcome Duhaime Schwenk, 1985. Schwenk 1986, p. 304 summarized the notion of escalating commitment:
Many different personal and organizational decisions involve an initial commitment of resources time, effort, money, etc. followed by results which
suggest initial failure and a need for additional commitment which may save the venture.
Staw Ross 1978 referred to this phenomenon as “retrospective rationality”, and argued that further commitment to a failing course of action is an ego-defensive
response which will be particularly pronounced when the individual is personally responsible for the course of action. Evidence on escalating commitment can be found in
a wide variety of decisions ranging from international politics to business organizations and individuals Duhaime Schwenk, 1985; Staw, 1981.
The basic proposition being asserted is that, the absence of sponsorship bias, the treatment of implicit opportunity costs in resource allocation decisions will be associated
with an individual cognitive style to take in information. In particular, it is suggested that in situation with or without sponsorship, managers with sensationthinking ST cognitive
style will tend to include opportunity cost information although it have zero opportunity costs, whereas those with intuitionthinking IT cognitive style will exclude them. The
manner in which cognitive style is expected to influence the treatment of opportunity costs of decision makers. The effects of cognitive style and sponsorship bias before
interaction presented as the following hypothesis: H1: Before interaction, in situation with or without sponsorship, managers with
sensationthinking ST cognitive style will tend to include opportunity cost information in their resources allocation decisions although it have zero
opportunity costs, whereas those with intuitionthinking IT cognitive style will exclude them.
2.3. Potential Interaction
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There has been no clearly articulated theory as to why social processes, such as sponsorship bias should dominate over the influence of cognitive style. However, several
commentators have stresses the need to consider the social environment as a potentially dominating factor which can modify individual attitudes and behaviour Neisser, 1976
and Pepitone, 1981 in Chenhall Morris, 1991. It is not that cognitive style does not affect behaviour, rather that there are many other contextual factors which may dominate
behavioural responses. Libby Lewis 1982 in Chenhall Morris 1991 suggested that one of the
difficulties of identifying the influence of psychological factors, such as cognitive style, is that in any given situation many factors influence how individuals process information.
These additional factors may be either psychological, social, organizational or environmental. Blaylock Rees 1984 argued that the diverse results of existing studies
into the effect of cognitive style may be due to a lack of comparability between the research settings of different studies.
The motivational impact of sponsorship bias on managers to exclude negative economic signals, form the basis for formulating the interaction hypothesis of this study.
This hypothesis identifies an interaction between the effect of cognitive style and sponsorship bias. We expect managers who, in non-sponsorship situations, may have a
proclivity to include past expenditures because of their cognitive style, to exclude them when sponsoring the project. Specifically, sponsorship will cause those intuitive
managers who include general purpose assets, and sensation managers who include expenditure on specific assets, to reverse their decisions and to exclude the items. The
interaction is ordinal as we expect managers who elect to exclude in non-sponsorship situations to continue excluding in a sponsorship decision environment.
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To summarize, the hypothesis relating sponsorship bias to the current study proposes that the effect of cognitive style, which generates include decisions, will be
confounded by sponsorship bias. H2a: Interaction between project sponsorship bias and managers’ cognitive style
affecting their treatment of opportunity costs. H2b: Interaction between project sponsorship bias and managers’ cognitive style
affecting managers with intuitionthinking IT cognitive style will tend to include opportunity costs information rather than managers with sensationthinking ST
cognitive style in resources allocation decisions.
3. METHODOLOGY 3.1. Research Design
A laboratory experiment with 2x4 factorial designs with Friedman Neumann’s 1980 multiple time-series research design was employed to investigating the effect of
cognitive style on the managers’ decision of opportunity costs in conditions with and without sponsorship bias. Myers-Briggs Type Indicator MBTI used for determining
subjects’ cognitive style. Cases and scenario was written that asked each subject to make a series of twelve
sets of decisions between two products having unequal margins. At the outset of the experiment, each subject was asked to assume the role of a middle-level manager who
must recommend one of two mutually exclusive products. The subjects were told they would be given some data and that it was economically feasible to request up to two
items of additional information, but that any information in excess of two items was prohibitively expensive. This scenario was followed by a set of instructions.
After receiving the instructions, subjects were presented information about the revenues and variable costs associated with each of two products and asked to choose
between the two products choice 1. Once the choice was made, subjects were given some additional information which included information about the opportunity costs
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