The Contribution of Formal Planning Systems to Strategic Investment Decisions1

Abstract

SUMMARYThis paper aims to investigate linkages between formal planning systems (FPSs) and characteristics of the processes followed in making strategic investment decisions (SIDs).The empirical testing was based on a sample of 70 SIDs drawn from 38 industrial enterprises operating in Greece. Primary data on FPSs and SIDs were provided by key participants in the decision‐making process, using a combination of structured interviews and questionnaire completion.Contrary to the argument raised by several academics that much decision making takes place outside FPSs, the findings of this paper support the view that at least for decisions of a clearly strategic nature this may not be valid. Results consistently show that strong associations exist between characteristics of SID processes and dimensions of FPSs. More specifically: The degree of rationality‐comprehensiveness as well as degree of financial reporting in the process of making SIDs is positively associated with FPSs. Particularly strong is the association between the existence of a set of formalized rules guiding the process of strategic decision making and FPSs. Furthermore, the association between both hierarchical decentralization and lateral communication in advancing SIDs and FPSs appears to be fairly strong. Finally, results failed to support any statistical significant relationship between duration timing of SID processes and dimensions of FPSs.