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

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  • Fadi Alkaraan
  • Deryl Northcott

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.

Suggested Citation

  • Fadi Alkaraan & Deryl Northcott, 2007. "Strategic investment decision making: the influence of pre‐decision control mechanisms," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 4(2), pages 133-150, June.
    • Handle: RePEc:eme:qrampp:v:4:y:2007:i:2:p:133-150
    DOI: 10.1108/11766090710754204
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    References listed on IDEAS

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    1. Slagmulder, Regine & Bruggeman, Werner & van Wassenhove, Luk, 1995. "An empirical study of capital budgeting practices for strategic investments in CIM technologies," International Journal of Production Economics, Elsevier, vol. 40(2-3), pages 121-152, August.
    2. Simons, Robert, 1990. "The role of management control systems in creating competitive advantage: New perspectives," Accounting, Organizations and Society, Elsevier, vol. 15(1-2), pages 127-143.
    3. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory-Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5&6), pages 603-626.
    4. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory‐Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5‐6), pages 603-626, June.
    5. N/A, 1991. "Appraisal," National Institute Economic Review, National Institute of Economic and Social Research, vol. 138(1), pages 3-5, November.
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    Cited by:

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    2. Asim Nasar & Muhammed Saleem Mugheri & Zeeshan Rahaman, 2013. "Managing Risk Factors through Corporate Governance for Financial Institutions of Pakistan," KASBIT Business Journals (KBJ), Khadim Ali Shah Bukhari Institute of Technology (KASBIT), vol. 6, pages 114-123, December.
    3. Grant, Michael & Nilsson, Fredrik, 2020. "The production of strategic and financial rationales in capital investments: Judgments based on intuitive expertise," The British Accounting Review, Elsevier, vol. 52(3).
    4. Huikku, Jari & Karjalainen, Jouko & Seppälä, Tomi, 2018. "The dynamism of pre-decision controls in the appraisal of strategic investments," The British Accounting Review, Elsevier, vol. 50(5), pages 516-538.
    5. Alkaraan, Fadi & Albitar, Khaldoon & Hussainey, Khaled & Venkatesh, VG, 2022. "Corporate transformation toward Industry 4.0 and financial performance: The influence of environmental, social, and governance (ESG)," Technological Forecasting and Social Change, Elsevier, vol. 175(C).

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