Strategic capital investment decision-making: A role for emergent analysis tools?: A study of practice in large UK manufacturing companies

Alkaraan, Fadi and Northcott, Deryl (2006) Strategic capital investment decision-making: A role for emergent analysis tools?: A study of practice in large UK manufacturing companies. The British Accounting Review, 38 (2). pp. 149-173. ISSN 0890-8389

Full content URL: https://doi.org/10.1016/j.bar.2005.10.003

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Abstract

The complexity surrounding strategic capital investments present challenges to managers charged
with evaluating these projects. In particular over-reliance on financial appraisal tools is thought to
bias decision-makers against undertaking strategic projects that are crucial to the development of
business capability and innovation. In response to this concern, several emergent analysis tools have
been advanced as means to integrate strategic and financial analyses of capital investment projects.
This paper examines the use of both conventional financial analysis tools and selected emergent
analysis approaches in the capital investment decision-making of large UK manufacturing
companies.
The findings update previous studies on the use of financial analysis tools, but also examine how
their use varies between strategic and non-strategic investment projects and the extent to which
emergent analysis tools are impacting decision-making practice. Little evidence emerges of
integration between strategic and financial analysis approaches. Financial analysis techniques still
dominate the appraisal of all categories of capital investment projects, while risk analysis approaches
remain simplistic, even for complex strategic projects. Despite their noted potential for informing
strategic investment decisions, the emergent analysis tools barely register in practice.

Keywords:Strategic capital investment; Decision-making; Financial analysis; Risk analysis; UK manufacturing companies
Subjects:N Business and Administrative studies > N321 Investment
Divisions:Lincoln International Business School
ID Code:35025
Deposited On:18 Feb 2019 10:02

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