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Make it strategic! Financial investment logic is not enough

Published in Energy Efficiency. 2011, vol. 4, no. 4, p. 473-492
Collection Open Access - Licence nationale Springer
Abstract Profitability is not the main driver of capital investment decision-making; financial evaluation tools often play a secondary role in corporate investment choices; businesses do not follow capital finance theory prescriptions, contrary to what mainstream claims; the strategic character of investments has a heavier decisional weight than profitability. These findings are based on a review of different streams of literature (mainly organizational finance and strategic decision-making) which is described in the second part of the paper, after a first part summarizing the main stances of mainstream energy economics and the main findings of the alternative literature on energy-efficiency investments. Yet, what is a strategic investment? To fill the existing conceptual gap, we propose a definition of strategic investment and a new theoretical framework to analyze investment projects. An example of applying this framework to an energy-efficiency project is described. The partial influence of financial factors and the importance of strategic factors in investment decisions entail several implications for energy-efficiency practitioners, scholars, and public program developers, which are described in the last part of the paper.
Keywords Energy-efficiency gapInvestment decision-makingCapital budgeting toolsStrategic investmentBarriers to energy efficiencyIndirect benefits of energy efficiencyPublic policy
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Research groups ISE Pôle Sciences
Systèmes énergétiques
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COOREMANS, Catherine. Make it strategic! Financial investment logic is not enough. In: Energy Efficiency, 2011, vol. 4, n° 4, p. 473-492. doi: 10.1007/s12053-011-9125-7 https://archive-ouverte.unige.ch/unige:97517

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Deposited on : 2017-10-10

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