The Allocation of Capital within Firms
Metin Sengul, Afonso Almeida Costa, Javier Gimeno
Academy of Management Annals · 2019 · Volume 13 · Issue 1
Abstract
The allocation of capital within firms is a core managerial function, yet a topic that only recently has resurged in management research. We review research across disciplines dealing with how firms allocate capital, with an emphasis on the relevant research in strategy and management. We integrate relevant research across multiple disciplines and theoretical perspectives to bring forth a theoretically grounded conceptualization of capital allocation within a firm as (i) a process of determination, comparison, and selection among multiple investment alternatives, (ii) taking place across organizational levels of the firm, and (iii) influenced and constrained by the external context in which the firm is situated. We conclude by discussing some important implications for future research.
Keywords
internal capital markets, resource allocation, capital budgeting
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