STRATEGIC INVESTMENT DECISION-MAKING: COMPLEXITIES, POLITICS AND PROCESSES*

This article is a preliminary report on an investigation into the processes of investment decision-making. Three case studies from three firms are presented which show disparities in a number of aspects of process, for example, the length of time taken to arrive at a decision, the number and intensity of disagreements and uncertainties encountered. Data were collected for these cases through semi-structured interviewing from multiple informants in the three organizations, thereby permitting the use of analysis of variance techniques of the different perspectives given by informants. Perceptions of the effectiveness of the decisions were also gathered. One finding from the study is that the decisions with the lowest perceived effectiveness (in firm HE) also lost support from those involved in making the decision during the process, although the decision was eventually implemented. This decision also had the least agreement amongst informants as to the main sources of disagreements. Informants of all three decisions saw effect upon product quality and productivity, fit with business strategy and competitive position of the company as the most important factors to take into account in evaluating the decisions. In firm CG, however, there were disagreements as to how the investment should be evaluated. In the conclusions to the article a disucssion is given as to the nature of evaluation procedures in relation to the developing theory of information systems.     

AN EXAMINATION OF THE INFLUENCE OF MIDDLE-LEVEL MANAGERS IN FORMULATING AND IMPLEMENTING STRATEGIC DECISIONS

The upward influence of middle-level managers (MLMs) on strategic planning and decision-making is examined. It was found that: (1) upward influence activity was more prevalent in low risk/return types of strategic decisions than in high risk/return decisions; (2) upward influence activity was more prevalent during the implementation of strategic decisions than during the formulation of such decisions; (3) managers most often used rational arguments in their influence attempts; (4) managers were more likely to be successful than unsuccessful in influencing their superiors in strategic decisions; (5) managers most often attributed their success in influencing their superiors to internal causes and their failures to external causes; (6) managers from private sector organizations exerted influence in both high risk and low risk strategic decisions more frequently than did managers from public sector organizations; and (7) the number of years working with the superior was the best predictor of successful interactions and of risky decisions. Some insight into the development of widespread strategic thinking in an organization is provided.     

Flexibility in Strategic Decision Making: Informational and Ideological Perspectives

Adaptation is a crucial challenge for organizations, and an important theme in the strategy and organization theory literature. We still have much to learn, however, about the strategic processes by which adaptation is achieved. In this paper we focus on a basic element in the adaptation process, i.e. flexibility within the strategic decision-making process. We concentrate on strategic decisions because these choices are the most important adaptations the firm makes. We suggest that the core of all organizational adaptation is a decision-making process. Unless the decision-making process itself is flexible, it is unlikely the organization can be flexible enough to adapt. We derive hypotheses concerning the factors that lead to flexibility (versus rigidity) from both information processing and ideological perspectives, and test them in a study involving 57 strategic decisions in 25 companies. Our results identify three contextual factors related to both perspectives -- including competitive threat, slack and uncertainty -- that are helpful in understanding flexibility in strategy decision making. While managers appear to be more flexible when decisions are uncertain, we found that in the very conditions where managers need the most flexibility (high competitive threat and low slack), they are least likely to be flexible.     

Exploring the reshoring and insourcing decision making process: toward an agenda for future research

The topics of reshoring and insourcing have recently become more widely discussed among operations management and international business scholars and managers, as some firms are revoking their offshoring and outsourcing decisions. This research focuses on and clarifies the decision making processes related to the two distinct, yet closely related phenomena of reshoring and insourcing. It presents a conceptual framework of all theoretically possible reshoring and insourcing decisions, illustrated in its applicability by a review of the United States and German business press. Then four future research avenues are developed as part of an overall decision making framework together with an overview of specific research questions for this emergent field. Further research avenues include the need to differentiate between reshoring/insourcing as strategic direction or reaction to failure, studying organizational readiness in addition to decision drivers, improve coverage of the implementation stage and explore further contingency factors such as technological advancement as well as to focus on decision makers as the unit of analysis.     

A COMPARATIVE ANALYSIS OF STRATEGIC DECISIONS

This study examines the process of upward influence in a variety of strategic decisions. The study provides a list of categories and supporting data for the agents, methods, perceived outcomes, and perceived causes of success and failure of upward influence interactions that impact upon the strategic decision-making process in organizations. The results suggest that: (a) middle-level managers (MLMs) deal directly with their superiors and use rational or persuasive arguments in their upward influence interactions in strategic decisions; (2) MLMs are very successful in their influence interactions and attribute their successes to internal causes; (3) MLMs and their superiors view the influence episode similarly; and (4) upward influence activity in strategic decisions is quite similar to upward influence activity in non-strategic decisions. The study also examines individual and organizational factors that are associated with success and failure in influence activity in strategic decision-making.     

Power in Profit-Maximizing Organizations

I study how profit-maximizing organizations make decisions. Members of organizations tend to have incompatible preferences over decisions, but willingness to pay for decisions plays a very limited role in actual decision making. A sizable empirical literature documents that people who provide critical services, are hard to replace, or deal effectively with external shocks are powerful; they have disproportionate influence over decisions. This can be profit maximizing because the right to shape the firm through its decisions renders the firm more attractive as an employer. Thus, the relative costliness of employees' departures should affect their relative power.     

Patterns of power distribution in managerial decision making in Chinese and British industrial organizations

This article is one of three reports about the results of a Sino-British joint research project on managerial decision making in eleven Chinese companies and ten British companies. Forty managers and twenty trade union leaders from both manufacturing and service industries participated in the study. Data about decision-making patterns in eighteen different decision tasks in the organizations were collected. The results showed that there were interesting organizational and cultural differences in decision-making patterns in the two countries between manufacturing and service industries, between management and trade union groups, among short-, medium- and long-term decisions and across organizational levels. There were clear shifts of the decision-making power across organizational levels depending upon the type of decision tasks. A model of decision power shift was proposed in terms of the effects of organizational and cultural factors on patterns of organizational decision making. The implications of the decision power shift model to the management practice in the international context were highlighted.     

Do Managers and Strategies Matter? A Study In Crisis*

Highly interactive, tightly coupled, high-risk technological systems have introduced the potential for catastrophic events. Although many people consider crises and disasters to be inevitable, our results suggest that firms that are better able to avoid crisis events have top-management teams with a higher level of functional team heterogeneity, higher education levels, shorter organizational tenures, and more tenure heterogeneity. These characteristics serve as proxies for deeper underlying cognitive processes such as more complex thinking, quality decision making, dialectical inquiry, and multiple perspectives in solving potential catastrophic problems. These cognitive and social processes appear to be successful in addressing interactive complexity in high-risk technologies, and may be associated with fewer faulty assumptions about firms' vulnerability to crises. In addition, firms whose top managers' time and energy is devoted to managing acquisition and divestment activities are more likely to experience crisis events. Highly diversified firms emphasizing financial and bureaucratic controls appear to develop threat-rigidities, a lack of firm specific knowledge, and decreased information processing capabilities making them increasingly vulnerable to systemic crisis events.     

The practice of decision-making—some evidence

The theory of scientific decision-making is a well developed and coherent discipline, which may be expected to have had some impact on the decision-making processes employed by actual firms. This paper reports the results of a survey of engineering firms in South Wales, and casts some doubt on the hypothesis that advances in decision analysis have had a descernible impact on the practice of business. Moreover, the primary reason for this lack of impact appears to be that decision analysis is not perceived as relevant to the decision-making needs of managers. The paper concludes with some suggestion for overcoming this obstacle to the application of decision analysis.     

Strategic automation and decision-making authority

This paper studies how automation impacts the structure of decision-making in organizations. We develop a theoretical model of a firm, where a principal makes a decision about how much to prioritize the new product development division when the division is led by a manager who holds private information specific to this division and has misaligned preferences with the principal. The principal chooses whether to decentralize this decision by delegating it to the manager, resulting in more informed but unbiased decision. In this setting, we investigate how automation which reduces operational variability may alter this choice of organizational structure. The findings from our analysis show that firms deploy automation resources differently depending on their organizational structure: centralized firms choose to automate divisions that face more uncertainty, while decentralized firms do the opposite. Moreover, increasing access to automation results in higher centralization of decision-making in firms. In the extensions, we show that the strategic use of automation reduces the informativeness of intrafirm communication, and also, that automation can be a strategic substitute to monetary contracts.     

Do Individual Preferences Affect the Environmental Decision‐Making Process in Teams? The Role of Participation

Literature on organizations and the natural environment has focused on the importance of individual managers and leaders. However, this literature has scarcely ever focused on individuals in the team context, even when teams have been considered to be key for a firms’ environmental progress. Although teams’ environmental decisions can be enriched by the different contributions of team members, it is necessary that team members actually participate and contribute their preferences during the decision‐making process. We used an adaptation of the legislative dilemma task with 84 students to contribute to environmental management literature by analyzing members’ participation during the team decision‐making process. The results of this paper show how those members with environmentally proactive preferences have a higher participation during the decision‐making process, and as a consequence they have a greater influence on the team decision. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

Narrow‐Framing and Risk Preferences in Family and Non‐Family Firms

Building upon prospect theory’s concept of narrow‐framing, we explore family firms’ risk preferences across multiple decisions in corporate entrepreneurship. We argue that family firms’ decisions are less likely to be narrowly framed (more likely to be made as a group rather than in isolation) compared to non‐family firms. Examining the interaction between two risky decisions (internationalization and R&D investment) in two samples of publicly traded firms in the USA and China confirms our hypotheses. Family firms appear more likely than non‐family firms to diversify risk when making multiple decisions concerning corporate entrepreneurship. However, given inferior performance, risk taking across multiple decisions in family firms is positively related.     

Sustainable Supplier Selection in Megaprojects: Grey Ordinal Priority Approach

Due to mounting environmental and social challenges, supplier selection has become one of the most critical tasks of project-oriented organizations. Because supplier selection can affect the long-term success and profitability of the organizations and their projects, directly, embracing sustainability can add value in the equation. Considering sustainability measures can positively guide project managers in making better decisions for the projects in the long term. Therefore, the current study attempts to provide a conceptual model for selecting the best supplier based on a sustainability framework in megaprojects. Meanwhile, decision-making methods can be employed as a proper tool to find the best supplier. Ordinal priority approach (OPA) is a recent development in multiple criteria decision making (MCDM), while it has many benefits compared with other methods like analytic hierarchy process (AHP) and technique for order of preference by similarity to ideal solution (TOPSIS). However, this method cannot consider multiple ranks during the decision-making process, and using an uncertainty approach feels strongly. Grey systems theory (GST) can consider uncertainties with no need for large sample or proposing membership function. Hence, the current study employed the GST to consider multiple ranks for criteria and alternatives in the OPA method. This is the first time that a sustainable supplier selection framework has been presented for megaprojects with the aid of the Grey OPA (OPA-G) method. Finally, a case study has been examined to evaluate the performance of the proposed approach. The results show that the proposed approach can be used in real-world situations and it has acceptable performance under uncertainty conditions.     

The role of human sustainability in professional service firms. Evidence from Italy

Sustainability is a central topic for an increasing number of companies, as a part of their business strategies. Human sustainability, that is, preserving and improving the quality of human life, in other words, maintaining and advancing human capital, appears as one relevant issue in that context. Humans and human capital are the foremost resources for professional service firms. Their role in the international economic scenario will most likely depend on how they deal with human sustainability and the wellbeing of their people. In this perspective, the paper investigates the antecedents, and organisational implications, of human sustainability in such firms using a structural equation model (SEM) developed on 4,301 questionnaires filled by Italian Chartered Accountants. Findings shed new lights on some implications of human sustainability. Results show that human sustainability has a direct and significative impact on a firm's ability to innovate, fostering creativity and intellectual capital, thus being significant for corporate performance. As a practical implication, firms should accordingly shape their business strategies towards accounting for human sustainability aspects.     

DIVERSIFICATION WITHIN AUSTRALIAN MANUFACTURING ENTERPRISE

This study examines diversification of the activities of business organizations. The meaning of diversification has been ambiguous in many studies that have used the concept as a way of describing strategic resource allocation decisions within firms. Many previous studies of diversification have suffered from a number of deficiencies. Some studies have observed the consequences of firms’ resource allocation and made inferences about the influence of organizational and external environmental factors on managers’ decisions affecting diversification. Other studies, that have been concerned with investigating diversification from a focus within the firm, have often adopted a molecular approach, being concerned with a limited number of organizational or environmental characteristics. In an attempt to redress these deficiencies, a contingency theory framework is used to describe and, in part, explain the formulation of decisions affecting diversification. This involves developing an unambiguous definition of diversification, and identifying organizational and external environmental characteristics that may be used to aid understanding of why firms diversify their activities in different ways.     

Exploring the firm and country determinants of the voluntary adoption of integrated reporting

Information used to manage the business and support the decision‐making of stakeholders is being subject to an evolution. In this context, traditional financial reporting is considered not sufficient anymore. This has translated into a sharp increase in the number of firms that have begun to adopt emerging reporting practices. This study aims to examine the influence that both firm‐ and country‐specific characteristics have on the voluntary uptaking of integrated reporting internationally. In order to do so, it analyses a sample of 71 international listed companies that have adopted this reporting form in 2016. The results show that firms are more likely to implement integrated reporting if they are located in countries with a higher level of corruption perception and a better risk rating and that are considered as relatively more collectivist and feminist and with a long‐term orientation. Legal system has resulted to be not significant. As for firms' characteristics, large size, profitability, market‐to‐book ratio, and the size of the board are found to be significant variables. Moreover, the results indicate that the adoption of integrated reporting is not influenced by a higher level of leverage, firm efficiency and board diversity and independence.     

Managerial telework allowance decisions – a vignette study among German managers

Managers play an important role in the implementation of telework in organizations since they frequently have final approval over employees' requests for telework arrangements. Drawing upon March's (1994) dual-logic theory of decision making, the study examines antecedents of managers' responses to employees' requests for telework. Using a vignette study with a balanced experimental design, we investigated the impact of person-related, task-related and organizational context factors on managerial telework allowance decisions in German organizations. Several person- and task-related factors were found to be significantly related to managers' telework allowance decisions. Organizational context factors, such as a family-supportive organizational culture and formal policies were found to either directly or indirectly influence managers' responses to employees' requests for telework. More specifically, formal telework policies were important in stimulating favorable managerial telework allowance decisions when applicant criticality was low and the organizational culture was family-unsupportive. In line with March's (1994) theory of decision making, the study shows that utility maximization is only one perspective of decision making which managers apply to telework allowance decisions. Rule following and considerations of appropriateness are also taken into account by managers when deciding upon employees' telework requests.     

Business Strategy, Human Capital, and Managerial Incentives

We posit that the value of a manager's human capital depends on the firm's business strategy. The resulting interaction between business strategy and managerial incentives affects the organization of business activities. We illustrate the impact of this interaction on firm boundaries in a dynamic agency model. There may be disadvantages in merging two firms even when such a merger allows the internalization of externalities between the two firms. Merging, by making unprofitable certain decisions, increases the cost of inducing managerial effort. This incentive cost is a natural consequence of the manager's business-strategy-specific human capital.     

Reciprocated community support and small town - small business success

This paper presents an empirical test of the significance of reciprocated community support, in contrast with traditional economic factors and unilateral support, in the success of small businesses in small towns. The central hypothesis is that entrepreneurs who make non-market contributions to their community and whose community supports them, are more likely to consider their businesses to be successful. Logistic regression is used to analyse survey data from over 800 small businesses in 30 small towns of the state of Iowa (USA). The authors found that the interaction effect of an entrepreneur's service to the community, reciprocated by community support of the business, is the single most significant determinant of business success among dozens of indicators and characteristics of the respondent, the business, and the small towns in the sample. In addition, it was found that business people who feel successful expect to expand. These findings are relevant to rural development. The expansion of existing businesses is an important component of regional job growth.