Path analysis on escalation of commitment of investors in different project scenarios of PPPs
Abstract
In public-private partnerships (PPPs), escalation of commitment (EOC) of investors often occurs when receiving negative feedback, leading to a great waste of resources and not conducive to the sustainable development of PPPs. The degree of project completion and decision-making responsibilities of investors with different conscientiousness and neuroticism may affect subsequent resource allocation and further influence their escalation behaviour. Thus, through scenario simulation, this paper constructs path analysis to illustrate the formation mechanism of EOC by investors with diverse conscientiousness and neuroticism in different degrees of decision-making responsibilities and project completion, in which confidence in completing the projects may present a mediating effect. The empirical results show that completion degree and decision-making responsibilities both positively affect investors’ EOC and that the interaction is significant. The impact mechanism of conscientiousness and neuroticism on EOC varies in different project scenarios. Then, some targeted recommendations are proposed to curb EOC. The findings provide scientific evidence for governments to conduct effective governance of EOC in PPPs.
Keyword : public-private partnerships (PPPs), escalation of commitment (EOC), path analysis, conscientiousness, neuroticism
How to Cite
Luo, Q., Gao, R., Liu, J., & Li, Y. (2022). Path analysis on escalation of commitment of investors in different project scenarios of PPPs. International Journal of Strategic Property Management, 26(2), 127-140. https://doi.org/10.3846/ijspm.2022.16477
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Cui, C., Liu, Y., Hope, A., & Wang, J. (2018). Review of studies on the public-private partnerships (PPP) for infrastructure projects. International Journal of Project Management, 36(5), 773–794. https://doi.org/10.1016/j.ijproman.2018.03.004
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Gao, R., & Liu, J. (2019). Selection of government supervision mode of PPP projects during the operation stage. Construction Management and Economics, 37(10), 584–603. https://doi.org/10.1080/01446193.2018.1564347
Gao, R., & Liu, J. (2020). Value of investors’ escalation of commitment in PPP projects using real option thinking. International Journal of Strategic Property Management, 24(5), 348–364. https://doi.org/10.3846/ijspm.2020.13120
Goldberg, L. R. (1990). An alternative “description of personality”: the Big-Five factor structure. Journal of Personality and Social Psychology, 59(6), 1216–1229. https://doi.org/10.1037/0022-3514.59.6.1216
He, X., & Mittal, V. (2007). The effect of decision risk and project stage on escalation of commitment. Organizational Behavior and Human Decision Processes, 103(2), 225–237. https://doi.org/10.1016/j.obhdp.2007.01.002
Hogarth, R. M., & Einhorn, H. J. (1992). Order effects in belief updating: the belief-adjustment model. Cognitive Psychology, 24(1), 1–55. https://doi.org/10.1016/0010-0285(92)90002-J
Hueskes, M., Verhoest, K., & Block, T. (2017). Governing public-private partnerships for sustainability: an analysis of procurement and governance practices of PPP infrastructure projects. International Journal of Project Management, 35(6), 1184–1195. https://doi.org/10.1016/j.ijproman.2017.02.020
Jani, A. (2008). An experimental investigation of factors influencing perceived control over a failing IT project. International Journal of Project Management, 26(7), 726–732. https://doi.org/10.1016/j.ijproman.2008.06.004
Jani, A. (2011). Escalation of commitment in troubled IT projects: influence of project risk factors and self-efficacy on the perception of risk and the commitment to a failing project. International Journal of Project Management, 29(7), 934–945. https://doi.org/10.1016/j.ijproman.2010.08.004
Kahneman, D., & Tversky, A. (1979). Prospect theory: an analysis of decision under risk. Econometrica, 47(2), 263–291. https://doi.org/10.1142/9789814417358_0006
Ku, G. (2008). Learning to de-escalate: the effects of regret in escalation of commitment. Organizational Behavior and Human Decision Processes, 105(2), 221–232. https://doi.org/10.1016/j.obhdp.2007.08.002
Leatherwood, M. L., & Conlon, E. J. (1988). The impact of prospectively relevant information on persistence in a project following setbacks. Advances in Information Processing in Organizations, 3, 207–219.
Lee, J. S., Keil, M., & Wong, K. F. E. (2018). Does a tired mind help avoid a decision bias? The effect of ego depletion on escalation of commitment. Applied Psychology, 67(1), 171–185. https://doi.org/10.1111/apps.12109
Liu, J., Gao, R., Cheah, C. Y. J., & Luo, J. (2017). Evolutionary game of investors’ opportunistic behaviour during the operational period in PPP projects. Construction Management and Economics, 35(3), 137–153. https://doi.org/10.1080/01446193.2016.1237033
Liu, J., Liu, J., Gao, R., Gao, H. O., & Li, Y. (2019a). Identifying project factors that affect an investor’s escalation of commitment in public-private partnership projects. Project Management Journal, 50(6), 686–698. https://doi.org/10.1177/8756972819847874
Liu, S., Jin, H., Liu, C., Xie, B., & Mills, A. (2019b). Government compensation and costs of non-competition guarantee for PPP rental retirement villages. Engineering, Construction and Architectural Management, 27(1), 128–149. https://doi.org/10.1108/ECAM-01-2019-0063
Liu, Z., & Liu, C. (2004). Interpretation of escalation of commitment based on an experiment research: self-justification theory or prospect theory. China Accounting Review, 2(2), 249–258.
Mobekk, H., Fagerstrøm, A., & Hantula, D. A. (2018). The influence of probability discounting on escalation in information technology projects. International Journal of Information Technology Project Management, 9(1), 23–39. https://doi.org/10.4018/IJITPM.2018010102
Montealegre, R., & Keil, M. (2000). De-escalating information technology projects: lessons from the Denver International Airport. MIS Quarterly, 24(3), 417–447. https://doi.org/10.2307/3250968
Moon, H. (2001a). Looking forward and looking back: integrating completion and sunk-cost effects within an escalation-of-commitment progress decision. Journal of Applied Psychology, 86(1), 104–113. https://doi.org/10.1037/0021-9010.86.1.104
Moon, H. (2001b). The two faces of conscientiousness: duty and achievement striving in escalation of commitment dilemmas. Journal of Applied Psychology, 86(3), 533–540. https://doi.org/10.1037/0021-9010.86.3.535
Moon, H., Hollenbeck, J. R., Humphrey, S. E., & Maue, B. (2003). The tripartite model of neuroticism and the suppression of depression and anxiety within an escalation of commitment dilemma. Journal of Personality, 71(3), 347–368. https://doi.org/10.1111/1467-6494.7103004
Morer, M., Ansel, D., Michelik, F., & Girandola, F. (2018). Sunk cost of local elected representatives in situation of fiscal competition: an example of escalating commitment. Revue Européenne de Psychologie Appliquée, 68(1), 1–4. https://doi.org/10.1016/j.erap.2017.11.003
Norusis, M. J. (1992). SPSS for Windows: professional statistics user’s guide, Release 5.0. SPSS Incorporated.
Odean, T. (1998). Are investors reluctant to realize their losses? The Journal of Finance, 53(5), 1775–1798. https://doi.org/10.1111/0022-1082.00072
Pan, S. L., Pan, G. S., Newman, M., & Flynn, D. (2006). Escalation and de-escalation of commitment to information systems projects: insights from a project evaluation model. European Journal of Operational Research, 173(3), 1139–1160. https://doi.org/10.1016/j.ejor.2005.07.009
Pellegrino, R., Carbonara, N., & Costantino, N. (2019). Public guarantees for mitigating interest rate risk in PPP projects. Built Environment Project and Asset Management, 9(2), 248–261. https://doi.org/10.1108/BEPAM-01-2018-0012
Portugal-Pereira, J., Ferreira, P., Cunha, J., Szklo, A., Schaeffer, R., & Araújo, M. (2018). Better late than never, but never late is better: risk assessment of nuclear power construction projects. Energy Policy, 120, 158–166. https://doi.org/10.1016/j.enpol.2018.05.041
Ronay, R., Oostrom, J. K., Lehmann-Willenbrock, N., & Van Vugt, M. (2017). Pride before the fall: (Over) confidence predicts escalation of public commitment. Journal of Experimental Social Psychology, 69, 13–22. https://doi.org/10.1016/j.jesp.2016.10.005
Ross, J., & Staw, B. M. (1993). Organizational escalation and exit: lessons from the Shoreham Nuclear Power Plant. Academy of Management Journal, 36(4), 701–732. https://doi.org/10.2307/256756
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