Optimizing decisions using knowledge risk strategy

Purpose The paper aims to focus on a strategic approach for making trade-offs between knowledge and risk. Design/methodology/approach Knowledge and risk are viewed as organizational resources that have an inherent trade-off between them, so that optimal firm performance does not necessarily arise through greater accumulation of knowledge nor from reduced risk. This trade-off is represented as an efficient knowledge-risk frontier. The paper examines the dynamics of this frontier on organizational performance. Findings The concept of knowledge-risk strategy is presented which contends that non-probabilistic risk or uncertainty originates from gaps in knowledge. Research limitations implications The paper proposes a new line of research to understand decision-making in organizations, particularly those which focus on knowledge intensive products and services. Practical implications The paper proposes managerial approaches to improve organizational positioning relative to the efficient knowledge-risk frontier through greater awareness of contributors to knowledge gaps and risk in decision situations, as well as traditional strategic tools such as outsourcing. Originality/value The postulated link between risk and knowledge gaps establishes a knowledge-based view of firm risk and recognizes trade-offs for decisions regarding knowledge accumulation.

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