The dynamism of pre-decision controls in the appraisal of strategic investments

Jari Huikku; Jouko Karjalainen; Tomi Seppälä

doi:10.1016/j.bar.2018.04.002

The dynamism of pre-decision controls in the appraisal of strategic investments

Jari Huikku^*
, Jouko Karjalainen
, Tomi Seppälä

^*Corresponding author for this work

Research output: Contribution to journal › Article › Scientific › peer-review

14 Citations (Scopus)

Abstract

In this study we examine the dynamism of pre-decision controls in the appraisal of strategic investments, an area largely overlooked by the literature, even though it is of the utmost importance to understand the mechanisms companies use to ensure their optimal capital investments. More specifically, we investigate how changes in companies’ economic, strategic, and organisational conditions relate to an increased emphasis on pre-decision controls such as policies, procedures, and routines. The empirical data is based on 108 interviews from among the 150 largest Finnish manufacturing companies. The paper contributes to the scarce capital budgeting literature by extending the discussion of the adaptations of pre-decision controls to external and internal environmental changes. We add to the literature by showing that changes in management may play a decisive role in control adaptations. Furthermore, we provide strong support to maintain that increased financial pressure can be related to the tightened use of controls.

Original language	English
Pages (from-to)	516-538
Journal	British Accounting Review
Volume	50
Issue number	5
Early online date	1 Jan 2018
DOIs	https://doi.org/10.1016/j.bar.2018.04.002
Publication status	Published - 1 Sept 2018
MoE publication type	A1 Journal article-refereed

Funding

We would like to thank Thomas Ahrens, David Bedford, Seppo Ikäheimo, Habib Mahama, Jari Melgin, Antti Miihkinen, Deryl Northcott, Mikko Sandelin, and Sally Widener for their constructive comments on earlier versions of this paper. We are also grateful for the helpful comments from Kari Jussila and Panu Routila on the questionnaire. In addition, we acknowledge comments from the participants of the Manufacturing Accounting Research Conference in Helsinki (2012), the 6th Annual New Zealand Management Accounting Conference in Palmerston North (2012), EAA's Annual congress in Valencia (2017), and the accounting seminars at AUT University (Auckland, 2012) and UAE University (Al Ain, 2018). Furthermore, we wish to express our thanks to the people interviewed. The financial support granted to the authors by the Jenny and Antti Wihuri Foundation is acknowledged with gratitude. Appendix A

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 9 Industry, Innovation, and Infrastructure

Keywords

Capital budgeting
Generalised linear model
Management accounting change
Pre-decision control
Strategic investment

Access to Document

10.1016/j.bar.2018.04.002

Cite this

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title = "The dynamism of pre-decision controls in the appraisal of strategic investments",

abstract = "In this study we examine the dynamism of pre-decision controls in the appraisal of strategic investments, an area largely overlooked by the literature, even though it is of the utmost importance to understand the mechanisms companies use to ensure their optimal capital investments. More specifically, we investigate how changes in companies{\textquoteright} economic, strategic, and organisational conditions relate to an increased emphasis on pre-decision controls such as policies, procedures, and routines. The empirical data is based on 108 interviews from among the 150 largest Finnish manufacturing companies. The paper contributes to the scarce capital budgeting literature by extending the discussion of the adaptations of pre-decision controls to external and internal environmental changes. We add to the literature by showing that changes in management may play a decisive role in control adaptations. Furthermore, we provide strong support to maintain that increased financial pressure can be related to the tightened use of controls.",

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AU - Seppälä, Tomi

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AB - In this study we examine the dynamism of pre-decision controls in the appraisal of strategic investments, an area largely overlooked by the literature, even though it is of the utmost importance to understand the mechanisms companies use to ensure their optimal capital investments. More specifically, we investigate how changes in companies’ economic, strategic, and organisational conditions relate to an increased emphasis on pre-decision controls such as policies, procedures, and routines. The empirical data is based on 108 interviews from among the 150 largest Finnish manufacturing companies. The paper contributes to the scarce capital budgeting literature by extending the discussion of the adaptations of pre-decision controls to external and internal environmental changes. We add to the literature by showing that changes in management may play a decisive role in control adaptations. Furthermore, we provide strong support to maintain that increased financial pressure can be related to the tightened use of controls.

KW - Capital budgeting

KW - Generalised linear model

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KW - Strategic investment

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The dynamism of pre-decision controls in the appraisal of strategic investments

Abstract

Funding

UN SDGs

Keywords

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