Logo image
Back
Do Sunk Costs and Asset Specificity Affect Outsourcing Decisions? A Survey of Australian Public and Private Hospitals
Journal article   Open access   Peer reviewed

Do Sunk Costs and Asset Specificity Affect Outsourcing Decisions? A Survey of Australian Public and Private Hospitals

Gregory Laing and Barbara Geno
Accounting, Accountability & Performance, Vol.11(1), pp.49-73
2005
pdf
PDF - Published Version1.19 MBDownloadView
Published VersionPDF - Published Version Open Access

Abstract

Accounting, Auditing and Accountability management accounting accounting hospital administration
Management accounting focuses on the use of accounting information as applied within the context of a model of rational decision making. Normative models in management accounting postulate that only relevant cost information should be considered in the course of managerial decision making. In addition, decisions should follow the economic theory of maximising utility. Relevant costs are those future costs that differ between decision alternatives. As well as prescribing the relevant cost information, behavioural factors (such as past experience) are ignored. This paper reports on an empirical survey of the influence of sunk cost and asset specific information on outsourcing decisions made by managers in public and private hospitals which also investigates the influence of behavioural factors such as prior experience. The results suggest that decision makers are influenced by the presence of information about sunk costs and asset specificity. In addition to demonstrating support for the sunk cost effect, this research provided evidence that the level of sunk cost and not just the absence of sunk cost information influences decisions. However, neither years of experience as a manager nor past experience with outsourcing decisions proved to be significant predictors of the decision to outsource.

Details

Metrics

69 File views/ downloads
957 Record Views
Logo image