Role of information on outsourcing decisions.

• Main Authors: Cheong, Wyman Yew Meng., Gwee, Andy Yong Wei., Chong, Ying Wei.
• Other Authors: Chan, Sow Lin
• Format: Final Year Project
• Published: 2008
• Subjects: DRNTU::Business::Management::Contracting
• Online Access: http://hdl.handle.net/10356/10841
• Institution: Nanyang Technological University

The irrationality of the decision-maker has been explored in various situations such as escalation of commitment (that is, the allocation of additional resources to a failing course of action) and loss aversion. This research aims to study the decision-making behaviour of managers in an outsourcing context. Specifically, four independent variables are manipulated to investigate their effects on outsourcing decision. They are: sunk cost, the magnitude of sunk cost with respect to net savings resulting from outsourcing, manager’s responsibility for the historical investment and the performance of the current operation under consideration for outsourcing. A hypothetical outsourcing case scenario was developed to test the above variables. It was administered to a total of 342 third year accountancy undergraduates from Nanyang Technological University. The findings suggested that the presence of sunk cost information and the higher proportion of sunk cost to net savings resulted in a reduced likelihood of making