Demirkesen, S. (2025) Exploring the causes of sunk cost fallacy in the construction industry: Case of mega projects. Engineering, Construction and Architectural Management, 33(5), pp. 3761-3776. ISSN 0969-9988
Abstract
Purpose – This study aims to reveal the main causes of the sunk cost fallacy in construction projects. Thus, it is expected that sunk costs can be avoided, which have a big impact on construction costs. Design/methodology/approach – The construction industry is fragmented and dynamic. Therefore, it is vulnerable to several risks such as time, cost and labor-related risks. The complexity and fragmented nature of construction projects brings up the need for high financial investment funds. In some cases, this results in sunk costs that cannot be recovered. A considerable amount of sunk costs occurs due to the sunk cost fallacy meaning that construction practitioners feel responsible for completing the projects despite unsuccessful project performance indicators due to various reasons such as client pressure, restricting regulations and the need to develop a good reputation considering future projects. However, the sunk cost fallacy can sometimes result in irrecoverable losses, which can badly affect a firm's reputation regarding future projects. Findings – In this respect, a total of 207 industry practitioners were surveyed to determine the main causes of the sunk cost fallacy. The causes were then ranked based on the order of importance, and weights were assigned for each cause determined. Concerning such ranking and weighting, the most essential causes were revealed. Moreover, the study presents a total of 4 case studies, which are mega projects that came up with sunk costs. The cases are presented to support the main causes of the sunk cost fallacy exploring from which the sunk cost fallacy stems. Originality/value – The lack of research on sunk cost fallacy in the construction industry makes this study novel in the fact that a large sample provides data regarding the causes of sunk cost fallacy. The findings of this study can guide both industry practitioners and policymakers in terms of developing strategies to avoid sunk costs and experience higher success rates in their projects.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction; mega projects; sunk cost fallacy; sunk cost management |
| Index terms: | meaning, strategy, case study, construction practitioner, regulation, methodology, complexity, construction cost, construction industry, practitioner, cost management, construction project, project performance |
| Subjects: | accounting and finance, sociology, financial and cost management, data collection methods, research methods, management, industry analysis, systems engineering, production management, political science, practitioner, professional development, project management theory and practice |
| Topics: | Business Strategy, Engineering Principles, Cost Management, Information Management, Roles and Professions, Research Practice, Governance, Project Management |
| Descriptive scope: | 4 PCTE |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here