Extending the risk management perspective

Andersen, Torben Juul; Schrøder, Peter Winther

doi:10.1017/cbo9780511816017.005

Cited by 2 publications

(8 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Under these circumstances firms must invest in business development to persevere and gain sustainable competitive advantage by deploying valuable, rare, inimitable, and firm‐specific resources (Barney, 1991, 2002). However, this approach requires that a certain level of organizational resources is made available to experiment with new innovative ideas and support their development into viable business propositions (Andersen, 2006; O'Brien, 2003). That is, corporate capital structure decisions should consider the allocation of financial resources for ongoing development and execution of responsive strategic options.…”

Section: Innovation Financial Slack and Capital Structurementioning

confidence: 99%

“…The pursuit of innovative initiatives and their development into viable business propositions, or strategic options, constitute an essential investment in innovation. It implies that organizational resources are committed towards the development of products, processes, and services that correspond better to current environmental requirements and thereby improve the firm's ability to respond to changing conditions (Andersen, 2006; O'Brien, 2003). The development efforts support the creation of alternative business propositions that enhance possible strategic choices and form growth options with future economic value (Myers, 1977).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…Hence, the positive influence of innovation on corporate responsiveness may show diminishing economic effects the more slack the firm commits to investment for this purpose. Nonetheless, the generated slack in capital reserves made available through lower financial leverage makes it possible to execute the business propositions once they have been developed and may thus enhance the positive risk management effects of innovation (Andersen, 2006; O'Brien, 2003). These arguments lead to the following three hypotheses.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…The ability to pursue responsive initiatives and effectuate alternative strategic options requires that a certain amount of financial resources are readily available for investments necessary to implement the related commercial opportunities (McGrath and Nerkar, 2004; O'Brien, 2003). As distinct from financial options, real options typically require some initial project investments when the underlying business propositions are executed (Andersen, 2006; Dixit and Pindyck, 1994). In other words, the corporation should make a certain level of capital reserves available by maintaining low financial leverage to exploit the strategic options and enable their exercise when conditions suggest that it is advantageous to do so (Miller, 1998; Luehrman, 1998).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…Nevertheless, the strategic responsiveness of the firm seems essential for effective risk management outcomes given that strategic risks constitute some of the most significant corporate exposures (Slywotzky and Drzik, 2005). This means that risk management not only should serve to limit downside losses but also seek to identify, develop, and exploit opportunities (Andersen, 2006 pp. 398; Slywotzky, 2007).…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Effective risk management outcomes: exploring effects of innovation and capital structure

Andersen

2009

Journal of Strategy and Mgt

View full text Add to dashboard Cite

PurposeThe purpose of this paper is to argue that strategic responsiveness is of paramount importance for effective risk management outcomes and to introduce an empirical study to demonstrate this.Design/methodology/approachReal options logic is adopted to explain how effective risk management capabilities improve performance and how innovation and financial slack enhance this effect. The propositions are examined across 896 companies using two‐stage least square regressions.FindingsThe study reveals that risk management effectiveness combines both the ability to exploit opportunities and avoid adverse economic impacts, and has a significant positive relationship to performance. This effect is moderated favorably by investment in innovation and lower financial leverage.Research limitations/implicationsThe analysis is based on a sample of large firms, which may affect the generalizability of results. Nonetheless, the study shows that effective risk management capabilities differentiate the firms and determine success and failure. It further underscores the importance of combined innovation policy and capital structure decisions as firms deal effectively with risk and uncertainty.Practical implicationsThe findings indicate that corporate management must consider commitments for innovation and financial slack to enhance positive risk management effects. This result is in dire contrast to traditional beliefs that tighter resource management and higher financial leverage lead to better economies.Originality/valueThis is one of few studies to explicitly consider strategic responsiveness as instrumental for effective risk management outcomes while investigating the economic effects associated with the ability to combine generation of upside gains and downside loss avoidance.

show abstract

Section: Innovation Financial Slack and Capital Structurementioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Effective risk management outcomes: exploring effects of innovation and capital structure

Andersen

2009

Journal of Strategy and Mgt

View full text Add to dashboard Cite

show abstract

The risk implications of multinational enterprise

Andersen

2011

International Journal of Organizational Analysis

View full text Add to dashboard Cite

Purpose -Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge-based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk. Design/methodology/approach -The paper provides a brief literature review, develops hypotheses, and tests them in two-stage least square regressions on archival data to control for pre-selection biases. Findings -The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.Research limitations/implications -The empirical study uses a sample of large US-based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings. Practical implications -The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes. Originality/value -The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.

show abstract

Extending the risk management perspective

Cited by 2 publications

References 9 publications

Effective risk management outcomes: exploring effects of innovation and capital structure

Effective risk management outcomes: exploring effects of innovation and capital structure

The risk implications of multinational enterprise

Contact Info

Product

Resources

About