Designing a capital budgeting system that works

Conventional capital budgeting systems do not fully reflect or adequately respond to the way in which capital expenditure decisions are actually made. Evidence also exists that the nature of this decision process is dependent on the type of the organization. This paper describes an empirically developed understanding of how capital expenditure decisions are being made, identifies ways to support and improve these decisions, and proposes an approach to linking the design of capital budgeting systems with the type of organization in which they are to operate.