chapter  12
27 Pages

Internal and external financial constraints on investment in innovative technology

WithAlasdair Lonie, Bill Nixon, David Collison

In this chapter, the authors describe the role of internal and external constraints by enquiring why case-study companies were not prevented by external financial pressures or by internal control systems from engaging in what were frequently high-risk innovational expenditures. Cost projections willingness to treat strategic expenditure as a special case which required a degree of freedom from normal financial constraints continued in company even when the parent company became much more financially oriented. The chapter examines the relationship between strategy and financial appraisal, highlighting the entrepreneurial role of the 'project champion. It focuses on case-study material and focuses on external as well as internal constraints on innovative investment. When technology-based new product and process development is at the hub of corporate strategy, then financial controls fail to constrain investment in innovative technology. The case that capital budgeting procedures are biased against strategic and innovative investment has been cogently argued.