Optimizing decisions using knowledge risk strategy

Abstract

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.

Citation

Coleman, L. and Casselman, R.M. (2016), "Optimizing decisions using knowledge risk strategy", Journal of Knowledge Management, Vol. 20 No. 5, pp. 936-958. https://doi.org/10.1108/JKM-11-2015-0465