Optimizing decisions using knowledge risk strategy

The paper aims to focus on a strategic approach for making trade-offs between knowledge and risk.

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.

The concept of knowledge-risk strategy is presented which contends that non-probabilistic risk or uncertainty originates from gaps in knowledge.

The paper proposes a new line of research to understand decision-making in organizations, particularly those which focus on knowledge intensive products and services.

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.

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.