Validating the contextual framework for strategic investment decision making practices: Quantitative evidence from the Nordic countries

Abstract

The objective of this research was to quantitatively test the contextual framework for strategic investment decision making practices. The purpose was to evaluate the validity of the model by analysing financial, strategic and overall approaches to strategic investments decisions in the Nordic countries. The theoretical foundation of the study was based on a qualitative research conducted by Carr et al. (2010). The empirical part of the study was based on a survey directed to the chief financial officers of publicly listed companies in Finland, Sweden, Norway and Denmark. A total of 54 responses were returned in time for this study, corresponding to a response rate of around 6%. The data collected for this research was analyzed according to the contextual framework, by first positioning the companies to one of the four contextual categories of market creators, refocusers, restructurers and value creators. The strategic investment decision making practices of the different categories were then analyzed in the light of the results of the original study. Also practices supplementing the initial research were analyzed. The statistical methods used in this research include correlation analysis, mean comparison using t-test and regression analysis. The overall validity of the contextual framework for strategic investment decision making practices proved to be good. The explanatory power of the initial study is strongest in the sense how companies weight financial and strategic aspect to these investments. Furthermore, the model implies that target required rate of return decreases and flexibility to meet financial targets increase, as moving from restructurers to market creators. The model does not provide knowledge on the utilization of financial appraisal techniques, whereas size affect to this matter significantly. Supplementary findings indicate that risk analysis methods and innovativeness in used techniques increases, when moving towards higher market orientation and context.