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Spring 2004, Volume 1, Number 1, Pages 84-95
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| Article |
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| Strategic risk and competitive advantage: an integrative perspective |
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| Avi Fiegenbaum1 and Howard Thomas2 |
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1Davidson Faculty of Industrial Engineering and Management, Technion-Israel Institute of Technology, Technion City, Haifa Israel
2Warwick Business School, University of Warwick, Coventry UK
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Correspondence to: H Thomas, Dean, Warwick Business School, University of Warwick, Gibbett Hill Road, Coventry, CV4 7AL, UK. Tel: +44 2476 524 534; Fax: +44 2476 523 719; E-mail: Howard.Thomas@wbs.ac.uk |
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| Abstract |
| The purpose of this paper is to investigate the important relationship between risk taking and competitive advantage. Over the last two decades, a range of theoretical frameworks, drawn from behavioral decision theory, agency theory and strategic management have examined organizational risk-return trade-offs. This paper develops a model for the strategic management of risk. A dynamic model of competitive strategy linking risk and competition is presented, in which strategic reference points and risk attitudes are endogenously determined and influence risk/return performance. Following Shapira's (1995) arguments that good managers take high risk but are able to reduce it over time, we highlight the relevance of managing risk taking to achieve competitive advantage and then show how risk-seeking organizations can strategically achieve sustainable high returns at low risk.
European Management Review (2004) 1, 84-95, advance online publication, 5 March 2004; doi:10.1057/palgrave.emr.1500002 |
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| Keywords |
| strategic risk; behavioral decision theory; strategic reference points; competitive strategy; strategic groups; resource-based view; competitive advantage |
| Received 30 October 2003; revised 7 November 2003; accepted 8 November 2003; published online 5 March 2004 |
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