3 of chapter 6 clemen 1999 consequently in time the

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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.

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