The Cost Stickiness Phenomenon

Abstract

This chapter provides the framework for the subsequent ones and reveals potential for future research through a comprehensive discussion of the cost stickiness phenomenon. Section 2.1 differentiates between sticky cost behavior and the traditional assumption of symmetric or proportional changes in costs in response to changes in activity. For this purpose, Section 2.1 first presents the main findings from several research studies that provide early indications of an asymmetric reaction of costs to changes in activity. Furthermore, Section 2.1 discusses the seminal study of Anderson et al. [2003], which links cost stickiness to deliberate managerial behavior and laid the groundwork for cost stickiness as a distinct field of research. Section 2.2 discusses and structures the existing research literature on the characteristics of cost stickiness. The discussion of these studies is divided into several subsections, each of which has an individual focus and explores either general, firm-specific, industry-specific, or country-specific characteristics of cost stickiness. Section 2.3 elaborates on studies analyzing the impact of managerial incentives on sticky cost behavior.