Strategic Decision Making in the Digital Age: Expert Sentiment and Corporate Capital Allocation

We develop a theoretical perspective on how the increasing data availability in the digital age affects firms’ strategic decisions. Specifically, we explore whether, and under which conditions, external experts’ collective assessment of product‐technology domains impacts firms’ allocation of capital to their strategic business units engaged in these domains. Drawing on decision comprehensiveness theory, we propose that such expert sentiment has informational value for capital allocation decisions, and that this value is contingent on the available information’s determinacy and quantity. We find evidence for our propositions by studying 669 capital allocation decisions made by 85 pharmaceutical firms from 2005 to 2016, and by using supervised machine learning classifiers to analyse expert sentiment in almost 250,000 articles. Our study contributes to the behavioural theory of the firm by showing that, contrary to what scholars traditionally assume, decision makers broaden, rather than narrow, their information processing in comprehensive information environments.