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Unformatted text preview: s (Section 6.3 of Chapter 6; Clemen, 1999). Consequently, in time, the
current gulf between theory and practice would narrow. Furthermore, such research
would contribute to the theoretical debate between decision analysts and behavioural
decision theorists (Clemen, 1999). If, as many decision theorists believe (for example, French, 1989), companies that use decision analysis outperform those that
do not, such research would contribute to the theoretical debate between the decision
analysts and behaviouralists. The behavioural decision theorists would no longer be
able to claim that there is no value in a theory that does not aim to predict what
decision-makers will do. The third research question that this thesis aims to explore
then, is the question of whether success in decision-making depends on the decisionmaking process managers use (Hitt and Tyler, 1991) and, specifically, whether
adopting decision analysis techniques in investment appraisal decision-making has a
positive effect on organisational performance.
The literature reviewed in this section has indicated that there is a need for a study to
investigate the existence of a relationship between the use of decision analysis
techniques and concepts in investment appraisal decision-making and organisational
performance. This is the third research question that this thesis aims to answer.
However, before such a link can be proved to exist, two assumptions must hold. The
30 next section begins by stating these assumptions and proving their validity. It continues to review previous studies that have been undertaken investigating the
relationship between business performance and various aspects of the organisational
investment decision-making process. Specifically, the section focuses on those studies that have concentrated on the effects of rationality, formality and consensus in
the decision-making process since these are all features inherent in using decision
analysis techniques and concepts. The section concludes by advancing a hypothesis
for empirical testing.
2.5 DECISION ANALYSIS AND ORGANISATIONAL PERFORMANCE
As Dean and Sharfman (1996) observe, the following two assumptions must hold to
prove a link between investment decision process and decision effectiveness. Firstly,
it must be assumed that investment decision processes are related to choices; or, more
specifically, that the investment decision process followed influences the choices
made. Although this assumption appears intuitively obvious, many academics have
argued that the operating environment shapes organisational and individual choices
(for example, Aldrich, 1979; Pfeffer and Salancik, 1978). Others, however, claim that
despite the existence of these external factors, managers retain a substantial degree of
control over choices (for example, Miles, 1982; Child, 1972). One argument made in
favour of this position by Dean and Sharfman (1996) is that some managers make
very poor choices with devastating consequences for their firms, while others in very
similar circumstances make much better choices (for example, Bourgeois,...
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This document was uploaded on 03/30/2014.
- Summer '14
- The Land