A PROCESS MODEL OF THE MAKING OF BUSINESS DECISIONS THAT HAVE SIGNIFICANT TAX IMPLICATIONS (STRATEGIC DECISION-MAKING)

This research examines the process whereby strategic decisions that have significant tax implications are made in the large business organization.; The research involves a case study of the decision-making process at a large bank holding company. The process concerned the firm's response to a major change in the tax law.; Data were compared to Bower's (1970) model of the Resource Allocation Process. That model describes the strategic decision-making process in terms of a subprocess that defines the organization's response to an environmental stimulus; and a subprocess that governs the organization's adoption of a response. Both subprocesses are influenced by the organization's structural context.; The findings indicate that much of the case study can be explained by the Bower model. This suggests that the Bower model may have general applicability to the strategic decision-making process in firms engaged in banking and other financial service businesses. However, the Bower model fails to explain why the decision outcome was considerably less than optimal from a normative standpoint. The need for additional explanation is further evidenced by a pattern in the data that suggests the presence of a process of incremental strategic change.; The need for additional explanation led to an examination of models of the strategic process. Johnson's (1988) Organizational Action model was found to shed additional light on the data. That model is based on the proposition that the basic values and assumptions of the organization, i.e., its paradigm, exert an influence on the decision-making process that creates a bias in favor of outcomes that are consonant with the paradigm. As a result, decision outcomes tend to differ only marginally from earlier outcomes of the same type.; The ability of the Bower and Johnson models to explain the case study led to the synthesis of the models in a new model of the strategic decision-making process. The validity of the new model was tested by using it to explain the case studies that led to the Resource Allocation model.