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BEYOND FINANCE AND STRATEGIC MANAGEMENT ACCOUNTING.

UNRIVALLING KEY CULTURE AND CONTEXTUAL DIMENSIONS” IMPACT

ON STRATEGIC INVESTMENT DECISION MAKING PRACTISES

Author 1: Christine Soh

Department: Strategy and International Business

University/Institution: University of Edinburgh Business School

Town/City: Edinburgh

Country: United Kingdom

Author 2: Chris Carr

Department: Strategy and International Business

University/Institution: University of Edinburgh Business School

Town/City: Edinburgh

Country: United Kingdom

Corresponding author: Christine Soh

Corresponding Author”s Email: s1144163@sms.ed.ac.uk

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BEYOND FINANCE AND STRATEGIC MANAGEMENT ACCOUNTING.

UNRIVALLING KEY CULTURE AND CONTEXTUAL DIMENSIONS” IMPACT

ON STRATEGIC INVESTMENT DECISION MAKING PRACTISES

ABSTRACT

To investigate the role of context and culture in strategic investment decision (SID) making

practises, 30 case studies incorporating 60 interviews with chief executive officers (CEOs)

and finance directors from Singapore are conducted. Current SID making research has been

centred on the role of finance versus strategy. Yet, understanding the importance of finance

versus strategic management accounting techniques may not be sufficient to pinpoint

differentiated SID making approaches cross-culturally. Beyond financial variables, culture

differences are specifically highlighted for the dimensions of intuition, power distance

relationships, long term orientation and minimum financial versus strategic emphasis in the

30 case studies. The 30 firms are structured into 3 categories where contextual distinctions

are found. Market Creators, Value Creators and Restructurers show marked differences in

financial flexibility, financial expectations and attitude towards financial targets. Strategically,

the 3 categories exhibit differences in their strategic and control orientation. Market Creators

tend to be highly opportunistic and hands-off, Value Creators are highly defensive and exert

moderate control. Finally, Restructurers are low cost defenders, and exercise active control.

By incorporating culture and contextual dimensions to SID making, this research extends

current SID research beyond finance and strategic management accounting.

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Keywords: Strategic investment decision making practises; Financial techniques,

Strategic management accounting, Cultural and contextual influences; Singapore

Article Classification: Accounting and Culture

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INTRODUCTION

Strategic Management can be defined as the process, management and implementation of

strategic change, the formulation, management or control of strategy (Hussey, 1978) and the

knowledge that informed strategy (Shank, 1996). As strategic management is encountered in

most disciplines, this subject has been discussed rampantly in economics, engineering,

psychology, organisational sociology, political science, business history, accounting and

international business literatures.

Central to strategic management is the SID due to its change inducing and dynamic nature

(Eisenhardt and Zbaracki, 1992; Hussey, 1978). SIDs are often defined as ill-structured

(Dean and Sharfman, 1993a, 1993b; Eisenhardt and Zbaracki, 1992; Elbanna 2006), long

term and complex choices (Mintzberg et al., 1976) addressing the survival of an organisation.

SID making usually involves capital layout of significant magnitude and substantial resource

investment (Dean and Sharfman, 1993b; Eisenhardt and Zbaracki, 1992; Elbanna, 2006; Lu

and Heard, 1995). Key executives have to adapt to circumstantial environmental influences

which may induce a certain degree of management action and subsequent organisational

transformation (Dean and Sharfman, 1996; Hitt and Tyler, 1991; Nutt, 2008). The differences

in decision maker characteristics, nature and context of the organisation add to the intricacy

of major investment decisions (Hitt and Tyler, 1991; Nutt, 2002), as SID making influences

functions and denominations within business units (Hickson el al., 2003). The influences of

strategy on SID making can be summarised in Figure 1 below.

{Insert Figure 1 about here}

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This research aims to understand the role of context and culture in strategic investment

decision (SID) making practises. Discussion on SIDs has typically been covered sporadically

in cross cultural management, strategic management accounting and management accounting

literature. Current researchers have sought answers to this question in cross-cultural

management, strategic management accounting and management accounting literatures with

no clear conclusions to this date. Literature on SIDs has dramatically declined after 2010 and

discussion on large investments after 2010 often refers to large investments as the strategic

decision and not SIDs. One suspicion is that the literature on SIDs may be deemed to be of

little applicability to the theme of global strategic management accounting in international

business literature. Hence, through integration of the three themes of management accounting,

strategic management accounting and cross cultural management, this research question will

be answered through holistic lens. We structure the paper as follows. An overview of SID

making contextual research on is firstly presented, followed by research on cultural

dimensions. Secondly, we discuss cultural similarities and contextual differences across the

30 cases. We conclude by discussing the research limitations and areas for further research.

LITERATURE REVIEW

Context and the SID

Context refers to the SID’s internal and external environment where it is made (Nutt, 2008).

“Internal factors include surprise, confusion, and threat (March and Simon, 1958);

organisational features, such as approaches to communication and control and resistance to

change (e.g. Nutt, 2002); as well as decision importance. complexity and uncertainty (Nutt,

2008). External factors include public or private organisational differences, such as public or

private, as well as prevailing economic conditions, given by interest rates (Nutt, 2002).

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Researchers include these factors to test contingency arguments, which assert that context

influences the choice and its outcome, as well as how a decision is made”, (Nutt, 2008,

p.429). An exploration of the investment behaviour of the companies led to findings that

there are industry similarities in investment mindset (Papadakis et al., 1998). Yet other

researchers found that SID making varies between firms in different industry sectors due to

variances in environment, organisational and decision makers’ characteristics which are often

used to define the influences on the strategic investment process (Elbanna and Child, 2007;

Rajagopalan et al., 1993).

The comprehensiveness and rationality of decision making is linked to the stability of the

environment (Fredrickson and Mitchell, 1984) and environmental velocity (Bourgeois and

Eisenhardt, 1988; Eisenhardt, 1989a; Eisenhardt and Bourgeois, 1988). In a research on 42

European manufacturing companies, representative of predictable environment conditions,

80% of them use conventional capital budgeting techniques (Slagmulder et al., 1995, p. 133).

Their slower decision speed can be seen in Dean and Sharfman (1996, p. 377)’s comment

that “in the paint and coatings industry, for instance, neither demand nor competitors are

likely to change much, and industry standards are long-established. A discontinuous change

would strongly affect the success of decisions in the industry, but such changes occur rarely

in stable industries”. Limited use of DCF techniques are attributed to the unpredictability of

environmental variables in unstable versus stable industries (Chen, 2008). Judge and Miller

(1991) links comprehensive decision making characteristics of high velocity firms to higher

decision making speed. Higher information collection (Tomkins and Carr, 1996) and

procedural rationality (Dean and Sharfman, 1996, p. 376) are associated with the speedier

decisions made in those operating in highly unpredictable, complex, uncertain and high

velocity environments (Carr and Harris, 2004; Papadakis et al., 1998).

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The comprehensiveness, rationality, degree of corporate involvement and politics of decision

making is often linked to organisational size (Fredrickson and Iaquinto, 1989), structure and

managerial characteristics (Papadakis and Barwise, 2002; Papadakis et al., 1998). Literature

confirms the positive relationship between highly rational decision making and high leverage

conditions (Graham and Harvey, 2001; Verbeeten, 2006), large organisation size (Graham

and Harvey, 2001), highly formalised organisational structure and large interdependence

between business units (Miller, 1987) It is noted that larger firms that are operating in

predictable environments (Papadakis et al., 1998), has limited growth potential and markets

highly standardised products (Chen, 2008) with stable lifespans (Garvin and Cheah, 2004)

tend to be more rational in decision making.

Gaps in the literature

These SID characteristics can be regarded as the most commonly researched arena in SID

making. Yet, there are certain contradictions in the literature which makes the literature

confused to this point. The conclusions drawn are often asymmetric and non-integrative

(Elbanna and Child, 2007), showing little clear conclusions or coherent agreements to the

factors influencing the SID(Papadakis et al., 1998). One contradiction in the literature

pertains to the comprehensiveness of decision making in unpredictable, high velocity and

highly competitive environments. One group of researchers asserts that more comprehensive

decision making occurs in unpredictable environments (Bourgeois and Eisenhardt, 1988;

Eisenhardt, 1989a; Fredrickson, 1984; Fredrickson and Iaquinto, 1989; Fredrickson and

Mitchell, 1981) . Another group asserts that less comprehensive decision making occurs in

unpredictable environments (Chen, 1995; Dean and Sharfman,1993a, 1993b; Fredrickson,

1984). Secondly, there is little literature on political behaviour and intuition in comparison to

rational decision making. Hence, there is some degree of dissent on the relationship between

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political activity and organisation interdependence. Eisenhardt and Bourgeois (1988) asserts

that large interdependence between business units in the organisation leads to higher political

activity. In contrast, Welsh and Slusher (1986) found that large interdependence between

business units in the organisation leads to lower political activity. Large business units size

leads to lower corporate involvement and hence lesser political activity (Duhaime and Baird,

1987). Overall, high decision complexity or uncertainty leads to high politics (Schilit and

Paine, 1987), slower decision making and less rational decision making (Dean and

Sharfman,1993b). Reasons for these conflicting views may be attributed to the vast array of

country, institutional and cultural contexts. It must be recognised that the fieldwork mostly

undertaken to date was in varying manufacturing, service, logistics and not-for profit contexts,

with the majority occurring in the Anglo-Saxon environment. These assertions are not tested

in a multi-country environment to date (Kirkman et al., 2006).There are also lesser studies in

predictable industries in contrast to unpredictable industries. Due to globalisation, changes in

the business environment, business process and managerial decision making may have

resulted in difficulty in repeating past SIDM success. Further, current strategic management

research has focused on the effects by which the differences in managerial style and structure

have on individual, group and organisational behaviours (Reiche et al., 2010). Cross-country

comparison, the usage of SMA techniques (Guilding et al., 2000; Tomkins and Carr, 1996)

and the importance of non-financial measures (Chen, 2008) are much neglected in these

studies. Context and culture may influence decision making more significant today than in

the past. There may be little research on what should be done to assist decision makers which

is a case for concern as SIDM research needs to be prescriptive to assist researchers and

practitioners.

Earlier integrative literature reviews have been conducted by Rajagopalan et al (1993) and

Eisenhardt and Zbaracki (1992) summarizing strategic decision making process studies from

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1963-1992. There has not been a literature review of process studies after 1993, except for a

few studies linking the SID literature to a single component of the SID process. Most of the

literature tests the effects of a few variables on the DMP or outcome; which does not add

much to decision making which may need to be understood as a whole. Other significant

contextual discussions occur between 1993-2013 (Elbanna and Child, 2007: Mitchell et al.,

2011), which shows a need to update the literature following Rajagopalan et al.(1993)’s

summary From the conversation of existing researchers, there is a need to pull the contextual

categories of SID process research together (Hickson et al., 2003; Papadakis et al., 1998).

This paper attempts to integrate the contextual literature presented by investigating the link

between environmental factors, organisational factors and decision-specific factors that

affect the SID making process in line with the contextual framework in Figure II below.

{Insert Figure II about here}

Developments of contextual analysis

The content of a SID affects the choice of a SID, the SID making outcome and the SID

making process (Butler et al., 1991). Some researchers developed theoretical frameworks to

segregate companies into investment types due to the inter-relationship between SIDs. The

initial developments of contextual analysis have originated from Miles et al., (1978) who

divided companies based on the four categories of Defenders, Analysers, Prospectors and

Reactors. These categories are segmented by how companies react in entrepreneurial,

administrative and engineering methods to their selected industries. The P-A-D-R framework

in the Miles and Snow (1978) typology classify firms in 4 categories (Desarbo et al., 2005).

Prospectors are market seeking; Analyzers spend more time on strategy options; Defenders

prefer to maintain their superior positions in stable market segments and Reactors are highly

motivated by short-term environmental changes (Desarbo et al., 2005). Well performing

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firms are typically longer term and uses subjective performance evaluation (Miles and Snow,

1978). Miles and Snow (1978) further concluded that entrepreneurial firms are characterised

by looser and informal control systems. This view is supported by Porter (1980, 1985) which

may be accountable for its popularity due to its applicability to firms across industries and

countries (Desarbo et al., 2005). A latter development of Miles et al., (1978) framework takes

into account SMA and strategic management perspectives by dividing companies into 4

categories based on their market orientation extent and need for turnaround (Oldman and

Tomkins, 1999). Oldman and Tomkins (1999)’s model manages to take into account

contextual variables by suggesting that companies with a weak market orientation or poor

financial status will be more financially orientated. To the contrary, companies who are

financially strong or with a strong market orientated will be more strategically orientated.

These frameworks, while taking into account strategic accounting, and selected contextual

influences on decision making, does not account for SID making practises. These limitations

are addressed in Carr et al (2010)’s framework which integrates Oldman and Tomkins (1999)

framework with the Miles and Snow (1978) typology. Carr et al (2010) applied Oldman and

Tomkins (1999)’s framework to fourteen SIDs across U.S, U.K and Japan, thus converging

strategic management accounting (SMA), management accounting, strategic management

and SID literatures. The vertical and horizontal axes are modified to integrate Oldman and

Tomkins (1999)’s framework with the Miles and Snow (1978) typology (Carr et al., 2010).

Companies’ generalised approach to SID making are categorised in four contextual

categories; Market Creators, Value Creators, Refocusers and Restructurers by scoring them in

terms of the company’s ‘market orientation’ and ‘performance in relation to shareholder

expectations’ (Carr et al., 2010) .

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Gaps in SM contextual and content literature

While Carr et al (2010)’s framework is the first and latest SID focused framework integrating

SMA and SM literature, there are still certain limitations in this framework which is

discussed in this section.

The first weakness is the lack of application to new eastern contexts, thus barely satisfying

the fourth element of Who, When and Where in Whetten (1989)’s discussion on theoretical

contributory literatures. Carr et al (2010)’s framework might be superior in development due

to its integration of empirical literature incorporating Japan, US and UK, therefore applying

the framework to developed East and the well-researched Anglo-Saxon countries. However,

the 4-figure typology, while integrating the majority of contextual and SMA themes, failed to

apply the framework to new Asian countries, with the exception of Japan. There is still a

slight imbalance in the framework, with its use of 3 Japanese companies in contrast to 11

Anglo-Saxon companies. While Anglo-Saxon companies have been participative in SID

making research, research involving Asian stakeholder is painfully scarce. The reasons for

Asia’s exclusion can be due to the difficulty of Anglo-Saxon researchers in communicating

with and accessing Asian stakeholders. Another reason is the reluctance of Asian CEO’s to

share confidential information on the SID to researchers. Perhaps, the secretive behaviour of

Chinese decision makers with regards to their SID making behaviour and the lack of personal

access for many Singaporean researchers makes this topic a difficult one. We must mention

that if context can be used as an explanatory variable for SID making, the country of choice

should not make a difference to the SIDs’ original contextual classifications. Yet, choosing a

representative country for research is crucial to understand to what extent cultural attributes,

independent of the four strategic clusters are responsible for the firm’s SID making approach.

With the objective to further extend the framework by incorporating two Asian examples, we

matched the two Anglo-Saxon countries equally by adding Singapore as Japan’s closest

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developed Asian counterpart for a more updated perspective. Our research is the first SID

focused fieldwork to be conducted in Singapore, using matched industry samples. While

Singapore cannot be classified as an eastern representation, Singapore serves as a developed

representative of a country in between eastern and western cultures, similar to Japan. By

adding Singapore to the contextual framework for discussion, this research can meet Whetten

(1989)’s criteria of meaningful theory development.

The second limitation is that cultural attributes as an explanatory variable is neglected in this

contextual framework (Carr et al., 2010). National culture1 has a significant impact on SID

making (Elbanna, 2006; Haley, 1997; Hayton et al., 2002). Present contextual understanding

of SID making does not involve the culture of the firm (Dimitratos et al., 2011). Any

misunderstanding due to cultural differences can result in loss of collaboration opportunities

or financial losses. Though the study is conducted cross-culturally, taking into account

country differences, cultural attributes, though having been admitted in the earlier discussion

as pertinent to strategy formulation, strategic management accounting and strategic

management is omitted. In the latter discussion on cross-cultural management, key cultural

attributes applicable to SIDs are discussed.

The third limitation in the contextual framework is the failure to take into account the

differences between FDIs and domestic investments by suggesting that these investments are

the same. Overall the framework focuses on how SIDs are implemented, which might not be

adequate for decision makers seeking to find out why a SID should be implemented in a

certain manner. These conclusions may be misleading as each type of SID might be

inherently different. The current array of SIDM research is remarkably impressive, however, 1 The most commonly used 4 cultural dimensions are power distance, individualism versus collectivism, masculinity versus femininity and uncertainty avoidance (Hofstede, 1980, 1983). These dimensions are widely cited in cultural studies (Kirkman et al., 2006).

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the focus is still on one major SID that occurs within the last 5 years. As FDIs and domestic

investments are an emerging trend in global strategic management literature, this view may

make SID making literature largely irrelevant to global strategic management. The literature

on SIDs may be considered to be outdated by current researchers, with its lack of

segmentation between types of investments. As with globalisation, the current trend for new

research is to go global and focus on foreign investments and their success. Hence, this may

result in few researchers following up beyond Carr et al (2010). This is a pity as research on

the SID is relatively hard to conduct. The sensitive and confidential nature of a SID

(Slagmulder et al., 1995) which results in the overall reluctance of companies to participate in

this exercise makes this topic extremely challenging. Hence, the writing off of SID research

due to reasons of irrelevance is a large pity, as knowing how to deal with decision making in

complex settings and for large investments is crucial in global strategic management. Further,

if global strategic management involves taking investments overseas, doesn’t this mean that

large irrevocable decisions are made, fitting in with the definition of a SID? Can broad SID

making research with no distinction between FDIs and DIs be applied to global strategic

management? Interesting, the decision to invest overseas or domestically is a crucial part in

the SIDMP. It is noted that the study of the SID is an important one, to understand what

constitute an important, successful or unsuccessful decision, in order to gain competitive

advantage (Papadakis et al., 1998) before entering into its unknown domain. Before the firm

selects the SID, the decision makers firstly decide to invest domestically or abroad and the

motivating factor may be firm specific. Hence the factors motivating a firm towards FDI/DI

are crucial to the SIDMP. If past SID research can be applied to global strategic management,

this will be a major research breakthrough. It will be definitely useful to have a deeper

understanding of the level of financial techniques usage versus cultural, environmental,

decision maker and corporate influences on the SID making speed and type of industry the

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SID making process takes place from a FDI/DI perspective. To take this theme forward, a

new cultural element is introduced in this paper by investigating contextual themes and its

influence on the selection of FDIs or DIs in SID making practises. To facilitate better

collaboration between the east and west and satisfy the need for research to apply across

boundaries, and investment types, aspects of global strategic management literature;

particularly those focusing on FDIs and DI need to be incorporated into the typology to have

global applicability. The section after cross cultural management (CCM) will discuss global

strategic management and tie in the themes of FDIs and DIs to the theoretical framework.

Cross Cultural Research

In comparison to SID making contextual studies, research on cultural attributes at the national

or societal level have made considerable headway. Current cross-cultural studies that are

more popularly cited are Hofstede (1980), House et al., (2004) and Trompennaars and

Hampden-Turner (1997). Hofstede (1980,1983) had initially identified the 4 dimensions of

power distance, individualism/collectivism, masculinity/femininity and uncertainty avoidance.

However, Hofstede (1980)’s approach has been critiqued for his western bias. House et al

(2004)’s GLOBE studies emerged which increased Hofstede (1980, 1983)’s five cultural

dimensions to nine (Hofstede, 2010). House et al., (2004) argued that his sample is more well

represented as it encompasses 17000 organisations in 62 societies. The GLOBE studies

attempts to remove the western bias by measuring practices and values of three industries in

62 societies. Yet, the home country’s cultural influences do affect the firm’s SID making

practises (Dimitratos et al., 2011). If the business is product driven, most of the organisation’s

future growth will be achieved by either launching similar products to those already produced

or improving the performance of the existing products by moving into new markets for both

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existing and new products (Ward, 2012). Members from a particular country may prefer to

invest in a few chosen or popular countries due to intuitive familiarity with that country, the

existence of close partners and close location. Researchers assume that decision makers are

homogeneous within firms, not accounting for inter-personal ethnic, age and gender

differences, inter-country differences in industry sector and inter-firm hierarchy of decision

makers (Tung and Verbeke, 2010). The common debate on cultural convergence between

House et al. (2004) and Hofstede (2010) revolves on the arguments that executives

worldwide should follow similar patterns, disputing the time periods which the studies were

conducted (Hofstede, 2010). If these generic cultural debates hold true, the cultural

dimensions should apply to SID making studies. However, these dimensions have not been

applied to SIDs as yet as current and past empirical research has focused on cultural themes

with little emphasis on their relation to SID making. These elements of CCM research should

be incorporated to current SIDMP studies as the SID making process is highly complex

which requires extended amalgamation.

METHODOLOGY

Case study approach

This study adapts the case study method to incorporate broad, cultural and industry strategic

decision making contexts based on past strategic decision making research (Eisenhardt,

1989a; Eisenhardt and Graebner, 2007) within its real life context. The case study as a

research strategy enables the researcher to understand the dynamics of the SID within a single

company as the majority of SID making research focuses on a single decision and not the

whole organisation. For example, Butler et al (1991) uses three case studies to study the role

of organisational context on decision characteristics, decision uncertainty and SID making

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behaviour. These three firms are selected from three different organisational contexts (Butler

et al., 1991) which enables the author to understand different corporate contexts in SID

making. The three differing contexts can be described as follows; the first firm ‘is a relatively

small electronics company. Turnover for 1984-5 was approximately £25m in a dynamic,

fairly high technology market based upon the manufacture, installation and servicing of the

one central product line of electronic equipment. The capital investment here was concerned

with the replacement of this single product involving the expenditure of about £400k’. Firm

two ‘is a division of a major engineering capital goods manufacturer, CG. It is also

essentially a one product line company and has five or six major competitors both in

domestic and international markets. The impetus for its major capital investment of £4m was

to improve competitiveness by reducing substantially manufacturing lead times and annual

costs of about £4m by purchasing a new machining centre; this would also have a major

impact by purchasing a new machining centre; this would also have a major impact upon the

firm since it introduced a change in manufacturing technique.’ Firm three, ‘is a health

equipment supplier and is a subsidiary of a large multinational corporation. Of the three

decisions this involved the least expenditure (initially £75000 but rising to £150,000) but was

strategic in the sense that it introduced a new manufacturing process, fundamentally altering

the way in which the product was made, enabling improved efficiency and potential price

reduction, higher quality and some possible benefits for the user, although user acceptance of

these benefits remained unproved at the beginning of the decision process (Butler et al., 1991,

400-401). These three case studies incorporated multiple level of analysis within the firm

which is adapted in this research to investigate the SID at different conceptual levels.

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Data triangulation

Triangulated research which encompasses a close weaving of both case study, cross-sectional

field studies and survey methods in multiple iterations can address a broad range of external

and internal validity issues by using different research methods to address the same research

question in order to look for data convergence (Biber and Leavy, 2011). Triangulation of

research is carried out in three ways to increase the validity of the results2. First, theoretical

triangulation is used where SMA, MA, SM and GSM literature are used to combine 4

different theoretical perspectives to study the same research question. Secondly, data

triangulation is used where data is collected over three phases, incorporating themes of

culture, context, FDI and DI within this study to increase data validity. Investigator

triangulation is used by combining perspectives and data from actual transcripts from Carr et

al (2010)’s research to study the same research question.

Theory development

To enable a higher degree of accuracy, theme identification, depth, objectivity and theory

building (Eisenhardt, 1989b; Eisenhardt and Graebner, 2007), a broad research question is

tied in with the use of multi-case research with the objective to develop theory from the

varying opinions of existing research . The case study approach is the best method to describe,

identify, develop, generate and test the most frequently cited strategic decision making

hypotheses (Yin, 1992). One of the key benefits of the case study method is being able to

ensure comparability with past research. As shown in the literature review, the SID’s

2 Typically, triangulated research is carried out by using theoretical triangulation; where at least two different

theoretical perspectives are used to study the same problem or investigator triangulation where two different

investigators study the same problem or data triangulation where different data sources are used to study the

same research question (Biber and Leavy, 2011)

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contextual and cultural relationships are not well-defined. To set up a new contextual model,

a vigorous and detailed case-based approach based on past SID making research (Eisenhardt,

1989b) is used to tailor the Anglo-Saxon approach across to the East. The empirical data is

presented as a subset of the propositions and major themes discussed in current research in

order to construct the research question tightly on existing hypotheses and pattern match the

results to the strategic typologies to the case studies results to evaluate outcomes of real life

phenomenon and synchronise their relationships (Bourgeois and Eisenhardt, 1988; Eisenhardt,

1989b; Eisenhardt and Graebner, 2007).

Intercultural comparison

The prior database consisting 256 SIDs from 26 countries from Carr and Tomkins (1998),

Carr and Harris (2004), Carr (2005) and Carr et al., (2010) are reviewed to select 4 countries

with adequate prior research and quality comparative data for use in this paper. UK, US,

Germany and Japan are selected which are representative of developed countries worldwide

for adequate comparison between the east and the west. There are a significant number of

impressive single country studies that uses multi-case approaches (Bourgeois and Eisenhardt

1988; Butler et al., 1991; Eisenhardt, 1989a; Hitt and Tyler, 1991). The methodology for

cross cultural research affirms that direct comparison of data is not required if the primary

purpose of a single country research is to understand Eastern versus Western cultural

differences (Schaffer and Riordan, 2003). Hence, it is determined that a single country,

Singapore can be used to match the prior data from the developed east and developed west

obtained from Carr and Harris (2004), Carr (2005), Carr et al (2010). The need to examine a

smaller number of cases in a single setting shows the practicality of keeping the context of

the research within the boundaries of Singapore. Formal units of single country variable and

matching industries will be used in the series of case studies to prevent ambiguity and prevent

generalisation. The informal units of Anglo-Saxon counterparts will be used for comparative

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purposes, in order to explore the significance in value differences and mean scores in the

multi-country analysis (Schaffer and Riordan, 2003).

Stakeholders’ consistency

To increase the internal validity and external validity, replication logic is applied by

interviewing a minimum of 2 decision makers in the same function across the companies, and

varying company context to identify potential differences in SIDs making practices (Dean

and Sharfman, 1993a, 1993b, 1996; Eisenhardt 1989a; Nutt, 2008). To investigate the SID,

the most knowledgeable persons involves the key decision makers, who are normally the

CEOs of the companies. The SID involves the handling of major monetary transactions

which is normally handled by the finance director who is privy to most confidential issues

revolving around the SID. The next person chosen for interview is normally the finance

director as in tandem with the majority of SID making research. In the event that the finance

director is not available for interview, the next most knowledgeable person on the SID is

nominated by the CEO of the firm for interview. In total, 60 semi-structured interviews were

conducted with the CEO and finance director or the next most knowledgeable person. The

interview schedule involved semi-structured questions, structured questions and a 7-point

Likert scale questionnaire. The managing and finance directors from each company were

interviewed separately on the wider aspects of their management control styles, strategic

planning system, difficulties anticipated, cultural issues encountered and their views of the

competitive situation in order to remove inconsistences due to loss of memory (Nutt, 2008).

The interviewees were gently guided to recall their rationales, strategic and financial

techniques practised for the SID investigated. Table I below summarizes the company details,

industry classification and their SID details.

{Insert Table I about here}

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Notes were taken before and after the interviews, to include personal impressions in the

interview process. Secondary and archival data were used to score the companies into their

contextual categories. Supplementary data, such as accounting statements, financial reports

and annual reports for, were also obtained where possible. The interviews were transcripted

and NVIVO used to code the results into strategic themes. The transcripts are examined

meticulously, looking for specific words or phrases that fit the SIDs making themes identified.

To investigate the SID’s cultural impacts, we selected quotes from the transcripts for cultural

themes discussed by Hofstede (1980, 1983), House et al., (2004), Hampden-Turner and

Trompennars (1993) and Trompennaars and Hamden-Turner (1995) that appeared most

consistently. Contextual differences between the categories of Market Creators, Value

Creators and Restructurers were highlighted.

Sampling techniques

Two methods of sampling is often used in theoretical research. Probabilistic sampling is used

where a wide population is used for statistical representation. Non-probabilistic sampling is a

purposeful sampling technique where a population is used to specifically understand certain

phenomenon. In case study sampling, cases are selected where themes are observable and

likely to duplicate existing theory (Eisenhardt, 1989a). For instance, in Eisenhardt’s (1989b)

study, 8 microchip firms were deliberately selected from fast moving environments to

observe the themes of rational decision making. As the number and type of cases for the

paper is selected purposely to study the hypotheses drawn out in the literature review,

purposeful and not random sampling is used.

Population used for case study approach

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Case selection is one of the important aspects of this research as the sample used in this

research is drawn from the initial population selection.

To ensure reliability and validity, care is taken to ensure consistency of organisations. The

decision making boundaries of a firm is determined by its industry categorisation. The

industry which a firm falls in may influence SID making, as the environment, decision type

and firm differs in various industries. The theoretical population used for the case studies are

Singaporean privatised manufacturing organisations. The list of manufacturing companies is

obtained from Ministry of Manpower as all companies in Singapore are required to be

registered with the Ministry of Manpower. Contact with an employment agency was obtained

in order to obtain access to the companies registered with the Ministry of Manpower. A data

base of 10 000 privatised companies is next collated from the Singapore Ministry of

Manpower’s website to determine which companies form the base selection for interview. A

systematic procedure is followed where 200 companies are selected based on the highest

recent numbers of foreign labour employed, to provide an indication of probable current

investments that result in labour recruitment. As the ratio of Singaporean to foreign workers

falls in the number of 9: 1 for companies in the service sector and 5: 1 for companies in the

manufacturing sector, this number is an accurate indication of recent expansion activity.

Their company reports and websites is researched on to find out their company size, industry

and current investment decisions undertaken to match the companies across industries for

comparative studies. To ensure comparability, organisations are matched as closely as

possible by their common product focus in each industry sector, nature of decision makers,

type of ownership structure and size of the companies in order to keep variables constant with

the exception of SID and sector classification. These companies are selected based on three

criterions. Firstly, their company size must be between 100-200 employees. Secondly, they

must be in the manufacturing industry, with differentiated products; separated into raw

-22-

materials, secondary components, and finished goods. The third criteria is that 100 of the

firms must have investments overseas to differentiate between FDI versus DI for our analysis.

Sample Selection and Criteria

To prevent sample bias and overgeneralisation from selecting a small number of cases,

purposive or judgment sampling is used where the companies are selected based on the

research questions and hypotheses explored (Biber and Leavy, 2011). To avoid researcher

biases resulting in threats to external validity, the cases in this paper are selected to replicate

previous cases from Carr et al., (2010) in order to fill the categories in the 4-figure typology

and extend theory to the themes discussed in the literature review. The companies in this

paper are matched across industries to provide matching cases for comparative purposes with

the theme of context, culture, FDI, DI and with past research conducted on SIDs by (Carr,

2005; Carr et al., 2010; Eisenhardt, 1989; Butler et al., 1991). Replication logic is used

within manufacturing industries to increase confidence in the research results. SID

To further narrow down the population for study, prior research data published in Carr (2005),

Carr et al (2010) are reviewed to determine which company populations are suitable for

comparison with the privatised telecommunication and vehicle component companies used

for prior research. It is important to match the organisations to Carr (2005) and Carr et al

(2010)’s samples, as the theoretical framework, and comparative data in the analysis chapter

used are derived from the transcripts obtained from Carr et al(2010) work. To determine if

organisation or SID type is the primary determinant of the SID process , three sectors from

the primary, secondary and tertiary industries are selected to contrast fast moving, high

velocity, intermediate and stable industries from earlier field research conducted between

1988-2002 in US, UK, Germany and Japan (Carr 2005, Carr et al., 2010).

-23-

Case description

Story telling (Bourgeois and Eisenhardt, 1988; Eisenhardt, 1989) by using figures, direct

quotes and summarised boxes in order to provide new insight and increase the testable nature

(Eisenhardt and Graebner, 2007) of the sequential decision making process (Nutt, 2008).

These quotations are subsequently scored from 0% to 100% based on the strength of the

statement from a single informant and the repetition of the same meaning in a particular

theme from multiple informants. Charts and tables are used to test the hypotheses illustrated

in our literature review.

Within Case analysis

Individual case study write-up

The purpose of individual case analysis is to enable the researcher to be familiar with each

case, in order to identify duplicated themes for cross-case analysis (Eisenhardt, 1989a). For

each of the 30 cases, detailed notes are taken at the interview location, factory visits. Archival

data, transcripts and findings from internet websites are recorded in individual case folders.

Similar to prior multiple case researches (Eisenhardt, 1989a), a systematic data base is

created where the data from each case is organised individually.

Cross-case analysis

The weaknesses in case study research revolve around the theme of researcher bias, due to

poor information processing (Eisenhardt, 1989a). One way to avoid inaccurate information

processing is to look for inter-group similarities and differences within the case studies

(Eisenhardt, 1989a). To fulfil this objective of accuracy inter-group comparison, the 30 SIDs

are re-evaluated individually after the individual case write up in order to classify replicated

themes across contextual categories. These themes are selected from the research question,

-24-

objectives and research hypotheses identified in the literature review. The interview

transcripts are examined and coded meticulously in NVIVO, based on specific words or

phrases that fit the SDs making themes identified. In addition to the themes identified, the

most commonly occurring words in the transcripts are noted in each NVIVO analysis for the

identification of additional themes. New themes were added to the literature review, and the

research question and objectives are modified to adjust to these changes in each phase of data

collection. This tactic has the ability to enable the researcher to deliver unbiased results due

to structured dissecting of the data (Eisenhardt, 1989a).

RESULTS AND DISCUSSION

Cultural dimensions

Similarities in cultural characteristics between the 30 firms are shown in Table II below.

{Insert Table II about here}

These findings in Table II show remarkable convergence among the 30 Singaporean

companies even in the most contrasting contextual differences identified by Carr et al.,

(2010). Such consistent views can only reflect institutional and cultural differences common

to our Singaporean sample. Culturally, the way key executives analysis SIDs reflect long

termism and consistent minimum use of financial versus strategic techniques3. 3 Cultural traits like long termism and consistent minimum use of financial techniques may not be reflected in the control systems used by

the company. Thus future research should look at SIDs and control systems separately, to investigate if these traits are consistent throughout

the company’s policy.

-25-

Additionally, process variables on high power distance and intuition influences the making of

SIDs.7 out of the 9 Singaporean companies show a longer term outlook which correlates with

the proposition4 that Asian countries are longer-term in nature. 8 of the 9 Singaporean firms

exhibit high power distance relationships and use top down management techniques. While

House et al (2004) gave Singapore 4.99 for power distance, ranking behind UK, US,

Germany, Japan and China, we suggest that this score may be higher for CEOs and top

executives, when dealing with complex and large decisions. Evidence is found in the

transcripts when the CEO uses knowledge to manage uncertain decisions. Highly

bureacratic firms with controlling and governing management orientation typically uses

explicit and tacit knowledge when managing uncertainty ( Vasconcelos, and Ramirez, 2011).

While the use of financial and strategic techniques is largely regarded as a process variable

leading to differences in contextual strategic investment decision making(Carr and Harris,

2004) , the minimum use of financial and strategic techniques is protrayed as a unique

culture process variable from the evidence in our transcripts. Financial and strategic

techniques are highly disregarded in 25 of the 30 firms, with the CEOs relying on explicit

knowledge as a decision making tool as managers typically find invalidity in predicting

future results. Priority is given to the use of simpler financial tools like payback and ROI.

More sophisticated financial tools like IRR and NPV are neglected. SMA techniques are not

used in the 24 out of the 30 firms, though some of the CEOs mentioned that they knew about

those techniques, but found them highly irrelevant to their companies. Evidence on tacit

knowledge usage correlates to intuition as a main strategic decision making tool in 26 of the

4 Proposition 1: Asian firms are longer term in nature.

-26-

30 firms. Outer-directed cultures like Japan, Singapore and Spain, who regard ‘working lives

more as roller coasters, hurtling them up and down collectively, conveyed by forces beyond

their control’ (Hampden-Turner & Trompenaars, 1993), may prefer to use their own

experiences to guide strategic investments.

Our results therefore suggests that the Singaporean strategic decision is top down in nature.

Thus, as explicit and tacit knowledge is used to guide bureaucratic and hierachical

organisations, the corresponding strategic decision is long term and highly conservative due

to lack of desires to deal with environmental surprises and uncertainty.

However, there are still subtle contextual differences within the strategy and finance function

in the three contextual categories of Restructurers, Market Creators and Value Creators as

discussed in the next section.

Contextual differences

As shown in Table III below, marked financial versus strategic differences can be seen

among the three categories.

{Insert Table III about here}

Market Creators show the highest flexibility in financial targets with the loosest financial

monitoring among the three contextual categories. The financial performance of Market

Creators is high, ranging from 30% to 40% profit margin per year. Thus, CEOs and finance

-27-

directors of this category tend to be willing risk takers. As the 3 Market Creators are selling

consumer products, the environmental conditions can be considered the most turbulent and

unpredictable among the 3 categories. Thus, financial expectations are medium as they are

not overly ambitious, but expect constant investment to be able to keep up with the changes

in the market place. As such, their strategic orientation is high on differentiation to keep up

with the changing customer demands and they have an open prospecting strategy, welcoming

unrelated investments and incoming synergistic proposals as long as the investments meet

their minimum payback criteria of typically 5 years or ROI of 12%.

Similar to the Market Creators category, the financial performance of Value Creators is

exceptional, with profit margin ranging from 40%-50%. However, cash reserves are highest

in this category as profits do not tend to be reinvested. Thus, it is not surprising that they have

relatively flexible financial targets and loose financial monitoring. However, towards new

investments, their financial expectations are the highest among the 3 categories, with the

expectations that ROI targets of 25% and above must be met, though they are willing to

invest with longer payback periods and time horizons in mind. As the Value Creators are

manufacturing primary or raw materials like steel components, their competitors are few.

This monopolistic position gave these firms escalated market powers due to high barriers of

entry as the initial start-up cost of entering the industry is high. Thus, as staying ‘status quo’

will still yield high profits, the CEOs and finance directors of this category are very

conservative and cautious towards new investments. . They exert medium control over their

partners as risk aversion is matched with the company’s overall exceptional financial

performance. Hence, they are selective towards investments, and are highly defensive

towards their existing market positions, maintaining a bid and wait policy to determine if

their competitors decide to exit the market.

-28-

The Restructurers suffer from high financial constraints as portrayed by their tight financial

targets, stringent financial monitoring and low financial expectations with relation to their

SIDs. These results are expected with reference to Carr et al., (2010, p. 170)’s statement that

they will expect ‘weak performing companies to be highly constrained by tough financial

targets, as compared to strong-performers.’ Engineering and semi components in the

Secondary industries tend to be low cost defenders, suffering from severe profit restrictions.

They are persistent in exerting active control over their business as any misguided move

might drive them out of the market. Due to similarities in their products manufactured and

low barriers of entries, these firms often resort to drastic cost-cutting measures. The lower

IRR expectations of 10% for the Singaporean companies in contrast to Carr et al. (2010)’s

British vehicle component companies may be due to the differences in barriers of entry,

which are harsher for Singaporean semi-component companies.

Figure II below shows the comparative analysis of the Singaporean companies scored against

the 4-category typology.

{Insert Figure II about here}

Similar to Carr et al (2010)’s analysis of Japanese firms, no Singaporean firms was classified

as Refocusers. This leds us to question if Asian culture or specific contextual factors in the

selection of companies is the major contributor to the omission of Refocusers in the Eastern

context. Future research work could be targetted towards the Refocusers category and

increase the number of matched industries cross-culturally. Thus, new researchers will be

-29-

enabled to find out the reasons for fewer companies in this category and further extend the

framework to include the Eastern context.

LIMITATIONS AND RECOMMENDATIONS FOR FURTHER RESEARC H

This research focuses on contextual and cultural SID making integration which has not been

achieved in SID making history. Discussion on SID making practises has been mainly

centralised in Anglo-Saxon countries and showcased little expansion beyond financial versus

SMA themes (Carr et al., 2010). In Mintzberg et al (1976)’s framework, there is still a lack

of knowledge on the three routines of diagnosis, design and bargaining, the lack of linkage

between these three routines and their interplay with strategy formulation (Mintzberg et al.,

1976). Thus, by linking separate frameworks from the strategy formulation (Rajagapolan et

al., 1993) and SID making contextual literature to the decision making framework, this

paper’s renewed conceptual framework can be reconstructed to address the gaps identified by

Mintzberg et al (1976). Carr et al (2010)’s conceptual framework listed out factors relevant to

each strategic type which is a milestone in SID making literature. A further development

from the 4-figure typology can be the identification of specific SID types with a contextual,

cultural and investment overview leading to the firm’s higher performance using Rajagapolan

et al (1993)’s process framework. To date it is relatively unknown which SID process factor

contributes more significantly to higher firm performance. By drawing out SID making

themes from the transcripts from each contextual category, our contextual framework can

link company context, SID making approach and firm performance which will be highly

contributory to further research.

-30-

However, these research may have little applicability to Asia, as our research on cultural

dimensions have instead classified the minimum use of financial and SMA techniques as a

unique cultural variable common to all 30 cases. Evidences from the 30 Singaporean cases

show that the four cultural attributes identified by House et al (2004) may not be fully

applicable to SID making practises. Though the themes of long-termism and high power

distance were apparent in most of the 30 cases, we are also not able to pinpoint the cultural

attributes of assertiveness, and in-group collectivism for the 30 case studies.

Contextually, the clustering of firms each in the Restructurers, Market Creators and Value

Creators may show more significance in differentiating the SID making practises of primary,

secondary and tertiary firms. Thus, our results show that context plays a bigger role in

differentiating SID making practises cross-culturally. Yet, the 4-figure typology may not be

an ideal framework for applying SID making approaches to the developed eastern countries

due to the lack of use of the Refocusers category. Nonetheless, our research limitations

restrict our findings to 30 cases from 3 representative sectors, in a single country context,

Singapore. Further studies can seek to increase empirical research in more diverse sectors

from both developed and developing and transition Asian economies. Results from more in

depth case research can assist in reviewing this category to increase its relevance and modify

the 4-figure typology for cross-cultural applicability. Overall, the combined of contextual and

cultural themes can be a major research contribution propelling better western and eastern

collaboration. New researchers and business collaborators will be able to understand the

mechanics of decision processes more thoroughly by using the integrated conceptual

framework to aid SID making of large financial decisions.

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TABLES AND FIGURES

Figure I: Influences on SIDs

Post SID making: other decision support and

controls

Pre SID making: formulation of SIDs

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Figure II: SID making practises: a conceptual framework

Decision Process Model (adapted from Mintzberg et al., 1976, p.273)

Information gathering, analysis and dissemination

Effects of organisational learning capabilities on SID making practises

Effects of institution and culture influences on SID making practises

1.1.

1.2.

Carr et al (2010)’s contextual model. Companies are divided in the 4 categories of Refocusers, Market Creators, Value Creators and Restructurers

Rajagopalan et al (1993, p. 352) and Elbanna and Child (2007, p.433)’s adapted theoretical model

Decision Process Characteristics

Comprehensiveness

Extent of Rationality

Degree of Political Activity

Intuition

Participation/Involvement

Duration/Length

Extent/Type of Conflict

Decision-Specific Factors

Decision Motive

Decision Urgency

Decision Uncertainty/Risk

Decision Complexity

Process Outcomes

Decision quality

Timeliness

Speed

Commitment

Organisational Learning

Triggering

Recognition

Diagnosis Search, developing, defining and

designing

Evaluation and choice

Institutional and Cultural Influences

FDI versus domestic investments

Implementation and

control

Outcomes

Firm performance

Formal strategic reviews

versus emergent

strategy: intuition and

politics.

Top down management,

CEO influences, formal

financial reviews versus

participative decision

making

Rational Decision making,

centralised and HQ led strategy

versus intuition, policies in decision

making and decentralised emergent

strategy

Role and influences of

strategic analysis; PEST,

SWOT, strategic groups, etc

versus financial appraisal;

capital budgeting

Strategic controls; BSC

etc versus financial

controls. Top down

versus bottom up

management

PEST analysis

versus economic

indicators; market

share, ROI/ROA,

growth in sales,etc

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Figure III: 4-Category Contextual Typology (companies) REFOCUSERS. MARKET CREATORS.

SClothesCambodia(6,8.4) SClothesMalaysis(6,8.3) SCosmeticsSg(8,8.1) SPackagingSg(8,8)

SClothesVietnam2(7,8) SAudioSg(8,8) SClothesVietnam1(7,7.8) SFoodCn(7.5,7.8)

SCircuitBoardCn(4.9,5.4) SFoodVietnam(6,7.4) SMachcompCn(4.8,5.3)

SPreengCn2(4.7,5.1) SContainersVietnam(5.1,5.9) SPreengCn1(4.6,5)

SMetalSg(6,4.9) SEngCompSg(4.9,4.6)

SPlatingSg(4.7,4.4) SPreengSg5(4.9,4.1)

SChemicalSg(6,4.4) SMetalCn(9,4.4)

SPreengSg1(4.9,4) SPlasticSg(5,3.9) SOilCn(9,3.9) SChemicalCn(7,3.8)

SPremixSingapore(5,3.8) SPreengSg4(2,3.4) SSteelSing(6,3.5) SPreengSg3(4.1,3.3) SPreengSg2(4.5,3.3)

SPVCSg(2,2.9) RESTRUCTURERS.

VALUE CREATORS.

Performance in Relation to Shareholder Expectations

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Table I: Investment Details

No Company Nickname

Investment details Year of

Investment

Investment Location

Investment amount Approximated m(S$)

Percentage cash/loan Time to make a SID (1: less than 1 year, 2: 1-2 years, 3: 2-3 years, 4: 3-4 years)

Payback target(years)

ROI target(%)

Time horizon for SID to achieve Payback and ROI target

1 SSteelSing

Competitor takeover (gradual acquisition) of a steel manufacturer in Singapore. After the takeover, the steel manufacturers are reduced from 6 in Singapore to 5. This is the company’s only investment in the last 5 years.

2007 Singapore

10 100% cash over a period of 5 years. Stated that cash is less than 10% of their cash reserves

3 5 10 10

2 SPlasticsSing

Integration: Acquisition of drum manufacturing supplier to lower transport costs

2008 Singapore

5 100% cash 1 3 10 20

3 SPVCSing

Investment in new production facilities to produce materials in smaller quantities to meet the specific demands of customers and maintain profitability of the factory

2012 Singapore

1 100% cash 1 3 20 5

4 SChemicalSing

Invested in new factory and warehouse next to existing headquarters in Singapore to expand operations and continued their focus in Asia despite worldwide presence

2012 Singapore

50 10%/90% refinancing 3 10 20 10

5 SMetalSing

Invested in property development project by supplying products and construction services for an equity stake

2011 Singapore

1 100% cash 1 4 30 6

6 SChemicalsChina

Investment in Chinese factory to secure sole agrochemical supply source in China for sale in China and other countries.

2007 China 5 15% cash 85% refinancing loan

4 5 10 10

7 SMetalChina

Investment in Chinese Property Market by rendering full construction services to a development in China. Purpose: to vertically integrate by focuses on developing niche markets in China

2009 China 1,000 100% cash 1 3 30 5

8 SOilChina

Invested in new fleet in China to secure new markets in highly lucrative oil industries. Largest investment in a list of 8 investments over the period of 2008 to 2012.

2008 China 11000 10% cash/90% loan. CEO believes in high amount of leverage to secure more opportunities for investments

1 1 100 2

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9 SPremixSingapore

Expansion: New factory in Singapore to serve Singapore and Japanese customers. Continued investment in Singapore due to safety and tax subsidies in Singapore despite escalating costs of living and labour in Singapore.

2009 Singapore

10 10% cash 90 % loan 4 10 20 10

10 SPrecisionengSingapore1

Investment in new production facility to cope with demands for new products which only specific machinery can manufacture.

2011 Singapore

1 0% cash. 100 hire purchase agreement

1 3 30 3

11 SPrecisionengSingapore2

Investment in a new production facility, new machines for production of varied precision engineering parts

2008 Singapore

1 100% cash. Invested 0.5 million in 2008, 0.5 million in 2009

1 2 25 4

12 SPrecisionengSingapore3

Investment in a new production facility to lower overall cost of production and keep customers satisfied with fair prices.

2011 Singapore

1 100% cash 1 3 10 3

13 SEngcompSingapore

Expansion of factory by buying a 42000 square foot factory in Jurong

2008 Singapore

2.5 20% cash, 80% loan 3 3 50 3

14 SPrecisionengSingapore4

Investment in new factory units. Opportunity arose when neighbour wanted to sell units and company took over the units for sale.

2008 Singapore

1 10% cash /90% loan 1 5 10 5

15 SPrecisionengSingapore5

Expansion of factory from 2 units to 4 units. Heavy use of external consultants to produce financial reports and proposals to Spring Singapore. However costs are reimbursed by Spring Singapore. Emphasised that they knew an influential person in Spring Singapore.

2010 Singapore

2 0.5 million grant from Spring Singapore and 1.5 million in loan

3 3 20 5

16 SPlatingSingapore

Expansion: New cleaning system in line of machines to attract new customers that needs this clean room equipment for their products

2011 Singapore

1 100% cash. 0.5 in 2011, 0.5 in 2012

2 5 30 5

17 SMachcompChina

Investment in Chinese factory at U.S.A customer’s request with the promise of continuous businesses and referrals from that customer. Company has fixed group of customers but need to constantly reduce costs to keep customers happy

2007 China 1 100% cash 2 2 20 5

18 SPrecisionengChina1

Related diversification: Investment in a new Chinese factory to collaborate with Chinese partner at the request of old customer. Continued business guaranteed but does not reach investment in the facility. Overall company hopes to reach more clients as well.

2012 China 5 10% cash.90% loan 1 5 10 10

19 SPrecisionengChina2

Expansion: Investment in new Chinese factory to further penetrate Chinese market

2011 China 2 50% cash and 50% grant from Spring Singapore (Govt funding)

1 5 30 7

20 SCircuitboardChina

Unrelated diversification: Investment in restaurant in Chongqing, China

2010 China 2 100% cash 2 3 30 5

21 SPackagingSingapore

Investment in a new wholesale outlet to cover higher geographical area in Singapore

2011 Singapore

3 30% cash, 70% loan 3 2 20 3

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22 SAudioSingapore

Related Diversification: Investment in an KTV outlet to tap on retail market and property apprieciation opportunities

2012 Singapore

3 20% cash. 80% loan 3 2 30 4

23 SCosmeticsSingapore

New retail store to capture more new customers

2012 Singapore

5 10% cash, 90% refinancing

1 2 50 3

24 SFoodChina

Unrelated diversification: Investment in China's lottery card business through vending machines retailing lottery cards in China. Cheated by partner, business did not take off.

2007 China 1700 100% cash 1 5 50 5

25 SFoodVietnam

Investment in a new production facility in Vietnam

2011 Vietnam 1 100% cash 1 5 20 5

26 SContaintersVietnam

New factory in Ho Chi Ming, Vietnam for export of premium plastic food containers to nearby Asian markets due to low tax rates for Vietnamese exported products

2009 Vietnam 1.5 100% cash 3 5 20 7

27 SClothesVietnam1

Expansion: took over 2 Vietnamese subsidies and further upgraded performance sportswear facility in Hanoi Vietnam

2010 Vietnam 5 100% cash. 40% cash in 2006, 60% cash in 2010

4 7 30 10

28 SClothesVietnam2

Expansion: factory in Vietnam, Ho Chi Minh to take advantage of cheaper skilled Vietnamese labour, tax advantages and less currency risk for export of products to US market.

2009 Vietnam 4 100% cash. 2 million in 2006, 1 million in 2007, 1 million in 2009

4 5 30 10

29 SClothesMalaysia

Addition of new production facility in Malaysian plant in lieu of cheaper labour costs in Malaysia to serve customers in Singapore, Malaysia and Taiwan

2010 Malaysia 1 100% cash 3 4 25 15

30 SClothesCambodia

Expansion: factory in Cambodia to take advantage of cheaper labour market in Cambodia

2010 Cambodia

2 100% cash. 1 million in 2006, 0.3 million in 2008, 0.7 million in 2010

4 5 30 10

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Table II: Cultural similarities Cultural similarities

Market Creators Value Creators Restructurers

Long term orientation5

SClothesMalaysia, “Sometimes we have to do loss making deals because it’s the long term relationships forged over time and we do not want to lose that connection. But for that short term loss, you get future businesses that are profitable and referrals which are very important for the business.” SClothesCambodia, "we are here for many years and we have more to come. Our investments are here to stay with us."

SSteelSing, “Our investments are for the long term. I will say that people in my same industry invest the same way. We are squeezed out of our profits and we have to be conservative and watch our spending.” SPlasticsSing, “if you want an absolute number, after deducing all the costs, a 5% return will be very good. But anyway, it’s for the long term, for my descendants. We need the supply source.”

SPrecisionengSingapore3, “In the long term, we want to stabilise and strengthen our customer base. This is very important as once you acquired a customer and serve him well, the customer will stay with you and make money for you in the next 20-30 years.” SPlatingSingapore, “This expansion might increase our customer base in the long run and decrease our overall cost, so we can make a better margin.” SPrecisionengSingapore1, "As long as the customer base is stable in the long run, we can get machinery that fits their requirement. So, we buy the machinery to suit our customers” requirements. In the short term, we may not make money, but as long overall, our business is sustainable, we are fine. We look at the big picture.

Minimum use of financial and strategic tools

SAudioSingapore, “I don’t believe those extrapolated figures. I will look at the real reports after investing and if I made some money, I am happy.” SContainersVietnam, “There is no need for calculation.” SClothesVietnam1, “We use mainly market forecasts, observations and analysis. To understand a country, you need to go there and stay a month to see what it is like, not just one-two days.”

SPVCSing, “There is no point in making calculations that forecast into the future. Actual results are more important.” SMetalSing, “I don’t believe in accounting terms even though I know what is IRR and NPV. “ SOilChina, “We hardly forecast, nothing is stagnant.”

SEngcompSingapore, “If we need the machinery, we buy it. No need for fancy calculations.” SPrecisionengSingapore4, “All financial forecasts only serve to account to the shareholders and to act as a guideline. We still have to change our strategy rapidly if the situation changes. The external environment moves too fast for us to plan anything in detail or be overly ambitious. It”s best to live one day at a time.” SPrecisionengSingapore3, “Financial tools are mainly used to apply for the relevant grants.”

High power distance6

SFoodChina, “I make the decisions, tell them to the board and they agree with whatever I say.” SCosmeticsSingapore, "We tell our staff what to do and they do it without question."

SMetalSing, “This company is mine. Why will I care about what the rest thinks?” SOilChina, “I make the decisions myself. And I leave my three sons to run the company” SPlasticsSing, "We maintain a distance between the staff and myself to retain our seniority."

SEngcompSingapore, “I am the main decision maker, but I firstly consult my finance manager, who is my sister.” SPrecisionengSingapore4, “If I bother too much about everything else in the company, how will I find the time to play golf? As long as I make money that is the priority.” SPrecisionengChina2, “the CEO decides everything. Decisions made by the CEO and passed through the board. Still, the board consists a lot of our own people, you know.”

Intuitive SPackagingSingapore, “As long as I feel intuitively that the SID feels right, and I have enough budget, we will invest in it.” SAudioSingapore, “Based on experience and hindsight that it will make money, I invested.” SClothesVietnam1, “ I foresee that the market will pick up in 2012, and therefore I am investing more.”

SPVCSing, “We know each competitor, customer thoroughly. In fact, we are all very close. We do not need to use tools. Its all experience and common sense.”

SPlatingSingapore, “Intuition is very important as you need the foresight to predict the economic growth in the future, the customer demand and technology requirements.” SEngcompSingapore, “Hindsight, and the fact that I have a ready customer in China is more important for my decision.”

5 Short term orientation refers to respect for traditions, small propensity to save for the future and focus on achieving quick results. Long term orientation refers to the adaptation to changed conditions, strong propensity to save and incest, thriftiness and perservance in achieving results (Hofstede, 1983) 6 High power distance might be a key feature of capitalistic countries featuring Japan, Singapore and Spain , with strong ascriptive elites and organic ordering characteristics (Hampden-Turner and Trompennars, 1993).

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Table III: Contextual differences Contextual Differences

Market Creators Value Creators Restructurers

Flexibility of financial targets

Most flexible financial targets SPackagingSingapore, “Honestly we allow for fluctuations as long as we know that customers are still stable and still making orders.”

Flexible financial targets SSteelSing, “A 10% loss will cause some alert. However, as production profits shift month to month, this figure remains flexible.”

Tightest financial targets SPrecisionengSingapore1, “Normally we look for a 25% potential profit margin. Anything below that is cause for re-examination.”

Financial monitoring

Loosest financial monitoring SAudioSingapore, “I trust my financial director to do the financial calculations and submit the accounts to the relevant government bodies. I don”t look at them.”

Loose financial monitoring SMetalSing, “We are not too concerned about financial targets or financial monitoring.” SPVCSing, “the accounting schedules are incorporated into our entire accounting report. There is no separation and the investment is managed as a whole. We do not monitor loss or profit of the investment, rather as long as our company is in a financially viable position, we are fine.”

Tightest financial monitoring SEngcompSingapore, “Our CEO visits China once a month for a few days to monitor the operations and revise the strategy if the restaurant is making loss or even if it is breaking even in the month.” SPrecisionengSingapore3, “I monitor the investment closely to make sure our funds turn around as fast as they can.. We need to account to the shareholders, so we have very close financial monitoring policies” SPlatingSingapore, “Accounting schedules are sent monthly to my finance manager. I then look through them, monitor the trends and take actions to prevent any problems immediately. If any shortfall in profit in a month occurs, I will talk to the managers and nip the problem in the bud. If there is a sudden loss of maybe 10%, I will make a trip to Cambodia personally and revise the planning if required.”

Financial expectations

Medium financial expectations SFoodChina, “But if they did not produce ROI of say 10% , we will not invest more, but rather look at other interesting investments. “ SClothesMalaysia, “we have to ensure that our company benefits somehow from the money put in." SCosmeticsSingapore, “Of course, it must meet our minimum profitability criteria of 12%.”

High financial growth expectations SPlasticsSing, “We have plans to accelerate the growth in our revenue base quickly in 5 years” time by setting up a resources division to tap into the fast growing thermal coal sector…our capital expenditure is expected to be 15% or more in 2012 to meet our required annual revenue growth of 50%.”

Low financial expectations due to turnaround situation SEngcompSingapore, “ We have low expectations on profit, but zero loss is anticipated, we invest in something we don”t expect losses” SPrecisionengChina2, “As long as we break even we are fine.”

Strategic orientation- prospector versus defender

Opportunistic prospector SClothesVietnam1, “Strategic reasons are more important. We want to have many types of investments to reduce the risk that our core business may make less money.. I do not look for investments. They appear on my doorstep.” SFoodChina, “Investments may be anything that interest us, I don”t mind new ideas anytime.” SClothesMalaysia, “I have so much money. A little less or more doesn”t matter. Why bother to look for investments?”

Defender SSteelSing, “The investment is definitely related to my company”s business. We only consider investments in steel and things we know well. The company that we bought over is in the same business .By buying them out, we rid the market of our supplier, making us bigger and stronger.” SOilChina, “I am open to investing in unrelated businesses, but it must be connected to my core business.” SSteelSing," A more open and aggressive mindset can help the country advance more."

Defender/low cost SPrecisionengSingapore4, “The key reasons are strategic. We are investing in a new production line, to service the demands of these customers and increase our potential profit margin if we can. We make little or no profit in order to maintain the relationship with our customers for future business” SPlatingSingapore, “We are investing with the mindset of the young. We are always looking and investing to maintain our position in the market. We invest in the machinery to lower our selling cost. We do not wish to lose our core customers due to price and end up making a loss on our existing plant.”

Strategic control orientation- Hands off versus active control

Hands-off control SClothesCambodia, “We give our partners a free hand. We look at the figures at the end. If they match up, we invest more. If not, we exit.”

Moderate control SOilChina, “We select our partners carefully. Throughout the investment”s relationship, regular Skype meetings and monthly progress schedules are sent to us.”

Active control SPrecisionengSingapore1, “We are wary of potential partners due to losses in previous deals that were made carelessly, and through blind trust. Any step now is taken with great caution. If we invest in something overseas, I will delegate two trusted Singaporean managers over to manage the investment. Financial reports are sent bimonthly. I will also visit the plant regularly to monitor its progress.”