The Allocation of Capital Within Firms: A Review and Integration Toward a Research Revival

The allocation of capital within firms is a core managerial function, yet a topic that only recently has resurged in management research. The authors review research across disciplines dealing with how firms allocate capital, with an emphasis on the relevant research in strategy and management. The authors 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. The authors conclude by discussing some important implications for future research.