Strategic investment decision making: the influence of pre‐decision control mechanisms

Abstract

Purpose -This paper seeks to explore how aspects of pre-decision control mechanisms impact managerial decision-making behaviour with regard to strategic investment projects. Design/methodology/approach -This study adopted a mixed-method research approach. Research evidence was collected using a questionnaire survey of 320 large UK companies and eight semi-structured follow-up interviews with financial directors who responded to the questionnaire. Findings -The study offers insights into the use and impact of pre-decision control mechanisms such as: organizational strategy and operating objectives; expectations regarding the involvement of organizational personnel; formal approval procedures; financial evaluation requirements; pre-determined hurdle rates; established authorization levels and the influence of managerial intuition. Originality/value -This study adds to prior understandings of capital investment practice by employing mixed methods to examine how pre-decision controls shape the outcomes of strategic investment decision making. Pre-decision controls have received little attention within the prior literature, which focuses primarily on project financial analysis.

Precursors to the financial and strategic orientation of hotel property capital budgeting

“…Furthermore, while a large body of capital budgeting literature exists that has focused on which appraisal techniques are being used (e.g. Arnold & Hatzopoulos, 2000), much less attention has been given to how these techniques are being used (Alkaraan & Northcott, 2007) and how they might vary across different contextual settings (Haka, 1987;Slagmulder, Bruggeman, & Van Wassenhove, 1995;Verbeeten, 2006). Given the calls for nonfinancial measures to be integrated into management accounting systems (Kaplan & Norton, 1992;Vaivio, 1999), this appears as surprising.…”

“…Strategic factors are considered the most important nonfinancial consideration in the evaluation of a capital budgeting proposal (Alkaraan & Northcott, 2007;Butler, 1991;Grundy & Johnson, 1993;Mohanty & Deshmukh, 1998) and are often concerned with ensuring that a capital budgeting project delivers a 'competitive advantage' to the firm (Emblemsvag & Endre Kjolstad, 2002;Lefley, 2004;Lefley & Sarkis, 1997;Proctor & Canada, 1992). In order to ensure that a capital budgeting project does deliver competitive advantage, Emblemsvag and Endre Kjolstad (2002) explain that managers often cross-link the characteristics of risks and strategy to carry out a 'strengths, weaknesses, opportunities and threats' (SWOT) analysis.…”

Strategic Investment Appraisal: Multidisciplinary Perspectives

“…Typical examples of such decisions include mergers and acquisitions, joint ventures, the introduction of major new product lines and markets, the introduction of advanced manufacturing/business technologies and substantial shifts in production capability (Butler et al, 1991 andSlagmulder et al, 1995;Van Cauwenbergh et al, 1996;Tomkins, 1996, 1998;Slagmulder, 1997;Northcott and Alkaraan, 2007;Northcott and Alkaraan, 2007;Harris, 2014;Alkaraan, 2015).…”

Decisões de investimento em ativos de longo prazo nas empresas brasileiras: Qual a aderência ao modelo teórico?

“…Assim, visando à obtenção de retorno, o horizonte de vida útil dos ativos deve ser igual ou superior ao prazo em que geram o retorno. Ainda, estes investimentos são de difícil quantificação quanto à totalidade do benefício esperado e impactam consideravelmente o desempenho corporativo ao longo prazo (Alkaraan & Northcott, 2007).…”

“…A proposta consiste em verificar se há encaixe entre o modelo estruturado de análise de investimentos e as práticas dessa natureza adotadas por empresas brasileiras de grande porte. Assim, espera-se contribuir para identificação e compreensão dos fatores que orientam a tomada de decisão e de controle do modelo estruturado de análise de investimentos, sobretudo porque pouco se sabe, empiricamente, sobre os aspectos explorados para decisões de investimentos (Alkaraan & Northcott, 2007). Além disso, ressalta-se que o presente estudo ocupa-se do resgate de problemas que têm relevância prática no escopo do Sistema de Informações Gerenciais e se propõe a gerar um produto que pode contribuir para identificação de pontos fortes e fracos do gerenciamento que vem sendo praticado, e, dessa forma, orientando a ação empresarial.…”