Effects of contextual variables on strategic investment decision-making styles : An empirical study from Pakistan

Abstract

There is a gap in the literature of strategic investment decision making (SIDM) concerning the links between context variables, infrastructure and SIDM practices (or SIDM styles) in developing countries. This research aims to fill that gap. Survey data (N = 128) from the manufacturing companies listed on the Pakistan Stock Exchange was collected via an e-mailed questionnaire and visits to the companies. Data are analyzed with factor analysis and multiple regression analysis. The results reveal what we call four different SIDM styles (or emphases): managerial power-, financial analysis-, top management-, and strategy-based investing. These styles are considered to be novel perspectives on SIDM that have not been discussed in the previous literature. We find that high perceived profitability is linked only to financial analysis based investing style. Further, contextual variables, such as legislation or local gas shortfalls, have a significant impact on the SIDM style. The findings provide decision-makers and analysts with a comprehensive picture of strategic investment decisions (SIDs) in a developing market. For example, firms may benefit from analyzing their decision-making styles and their own SIDM context. There are no recent studies on SIDM practices with emphasis on a developing country specific local context issues. So, this research first fills the gap in the literature, by surveying the current SIDM practices in a developing country, using local context variables, and, by analyzing the different styles of SIDM.