Strategic investment decision-making: the influence of informal pre-decision controls in real estate investments

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School of Business | Master's thesis
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The purpose of the thesis is to critically examine the theoretical framework of strategic investment decision-making and to determine the impact of informal pre-controls on decision-making in the real estate investment market. These informal pre-decision controls are often referred to as soft decision-making controls, which are for example managerial judgment and strategic fit. The pre-decision phase includes the early stages of the strategic investment process, all the way to the initial decision-making. This stage of the investment process is often emphasized by the restricted access to background materials and the limited timeframe. First, the literature review outlines how pre-decision controls have influenced on the strategic investment decision-making in the previous literature. The thesis then proceeds to examine more specifically the informal pre-decision controls, and the concepts of sensemaking and action rationality. Finally, the literature review covers real estate literature and research on the impact of pre-decision controls on investment decisions. The empirical section was conducted as a qualitative case study, which was collected through interviews on a single large real estate transaction that took place during the research process. A thematic analysis model was selected as research method, which is one of the most known methods for analyzing qualitative data. The interviewees were very experienced real estate professionals and their role in the decision-making process was very significant. After presenting the results of the interviews, the findings are reflected against academic literature and the findings of the study are evaluated. The thesis provides strong support for the findings presented in the literature review and confirms that informal pre-decision controls play an important role in real estate investment decision-making. Despite the influential role of these soft decision-making controls, the core of the thesis is the close interplay between formal and informal pre-decision controls, as Puhakka and Vaivio (unpublished) also found in their research. In addition, verbal communication was found to have an even more important role in decision-making than actual facts.
Thesis advisor
Vaivio, Juhani
strategic, investment, decision-making, pre-decision controls, managerial judgment, strategic fit, real estate
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