Risk measures in strategic management research: auld lang syne?

Ruefli, Timothy W.; Collins, James M.; Lacugna, Joseph R.

doi:10.1002/(sici)1097-0266(199902)20:2<167::aid-smj9>3.0.co;2-q

Cited by 196 publications

(121 citation statements)

References 178 publications

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“…Risk is an inherent part of conducting business and it is arguably a critical aspect of firms' strategic processes (Ruefli, Collins, Lacugna, and Wiley, 1999). Not surprisingly, risk plays an important role in strategic management research Pablo, Sitkin, and Jemison, 1996).…”

Section: Risk Conceptualization and Measurement In The Management Litmentioning

confidence: 99%

“…In strategic management research the most common approach of measuring risk has been borrowed from financial economics and decision theory that conceive risk as the variance of a set of returns over time (Ruefli et al, 1999). This measure has been criticized amongst behavioral scholars as managers seem to associate risk more with losses and hazards than with variance in outcomes Shapira, 1995).…”

Section: Risk Conceptualization and Measurement In The Management Litmentioning

confidence: 99%

“…and find that strategic planning increases the likelihood of the survival of the firm as an entity, which represents a particularly important type of risk-outcomes. While scholars from prospect theory and threat rigidity literature have studied management choice and practices as a consequence of risk, there is a lack of information on how strategy-making practices affect risk outcomes (for a review on risk research in strategic management please see Bromiley et al (2006) and Ruefli et al (1999)). More analyses where risk serves as explanandum, and not explanaans, are necessary in order to provide better 15 guidance to business practitioners and to further theory-building efforts about various practices, processes, and tools of strategic management.…”

Section: The Strategic Management Perspective On Risk Managementmentioning

confidence: 99%

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Strategic Risk Management

Lam¹

2017

Implementing Enterprise Risk Management

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Section: Risk Conceptualization and Measurement In The Management Litmentioning

confidence: 99%

Section: Risk Conceptualization and Measurement In The Management Litmentioning

confidence: 99%

Section: The Strategic Management Perspective On Risk Managementmentioning

confidence: 99%

See 1 more Smart Citation

Strategic Risk Management

Lam¹

2017

Implementing Enterprise Risk Management

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“…We use the coefficient of variation of return on shareholder equity as a measure of variation in firm level performance and the extent to which environmental uncertainty impacts firm performance (Gomez-Mejia and Wiseman 1997) in addition to managerial strategic decisions and actions (Ruefli, Collins et al 1999). This measure of risk was selected from a review of risk studies that summarizes recent methodological findings and identifies coefficient of variation of company level return on investment ratios as one that is more consistent with an understanding of risk from a strategic management perspective than measures taken from financial economics based on capital asset pricing theory (Ruefli, Collins et al 1999). …”

Section: Company Level Measuresmentioning

confidence: 99%

Organization-Wide Broad-Based Incentives: Rational Theory and Evidence.

Marler¹,

Milkovich²

2002

AMPROC

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Despite the widespread use of incentive pay, there is limited evidence about what factors influence its organization-wide, broad-based application. This study uses data from three sources and multiple levels, including a unique data set of the total compensation of individual employees in 104 firms over a four-year period (1997)(1998)(1999)(2000), and theoretically and empirically examines the use of bonuses and stock options in organization-wide applications. We examine the efficacy of three main rational theories, principal-agency, positivist agency and contingency theories, which are based on the premise that incentives are related to performance. At the individual level we identify two determinants: type of job and level within the hierarchy and four determinants at the organizational level: performance, risk, size, and strategy. Our results indicate that the factors derived from the three theories provide a limited explanation for the variation in the use of broad-based incentives within and across organizations. Abowd's (1990) longitudinal studies of managerial compensation in Fortune 500 organizations suggested that companies paying a higher proportion of variable pay to base salary, also had higher subsequent financial performance, however, these results varied depending how performance was defined (Abowd, 1990) and whether the company was historically profitable (Gerhart & Milkovich, 1990). Other researchers have found that variable pay's effectiveness depends on the risk of the organization's earnings stream (Garen, 1994;Bloom & Milkovich, 1996;Aggarwal & Samwick, 1999), level of monitoring (Beatty & Zajac, 1996; Gray & Cannella, 1995) or fit with business level strategy (Boyd & Salamin, 2001;Montemayor, 1996;Gomez-Mejia & Balkin, 1992).Both researchers and practitioners have interests in understanding the application and efficacy of using broad-based incentives. This goal, however, is challenging for two reasons.The first is that different theories often offer somewhat different interpretations about how the incentive compensation-organization performance relationship works. Even rationally based theories whose premise is that better compensation practices result in better organizational Organization-wide Broad-based Incentives: CAHRS WP02-05Page 5 performance differs. For example, agency theory arguably the dominant rational theory with respect to this topic, has developed along two lines: positivist and principal-agent (Eisenhardt, 1988;Beatty & Zajac, 1994). While the two streams share common assumptions about people, organizations and information, they differ in their focus and in their dependent variable (Eisenhardt, 1988). Principal agent-theory focuses on the incentive effects of variable pay and the reduction of agency costs as the path to improved shareholder performance. Positivist agency theory suggests that monitoring rather than incentives may be more cost effective, particularly when the use of incentives shifts too much risk to the individual or when outcomes are not easily...

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“…In the roughly 20 years since these three papers (Bettis, 1983;Kester, 1984;Myers, 1984) were published, progress on reconciling finance and strategy has been significant (e.g., Chatterjee et al, 1999;Lubatkin and O'Neill, 1987;Miller and Bromiley, 1990;Miller and Leiblein, 1996;Miller and Reuer, 1996;Ruefli et al, 1999;Wiseman and Gomez-Mejia, 1998). Yet the reconciliation is still far from complete; a wide gulf still divides the -two cultures looking at the same problem‖ (Myers, 1984: 130).…”

Section: Introductionmentioning

confidence: 99%

Strategic Implications of Valuation: Evidence from Valuing Growth Options

Alessandri¹,

Lander²,

Bettis³

Advances in Strategic Management

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Strategy is ultimately aimed at creating shareholder value, placing valuation in a central role linking finance and strategy. Focusing on growth options, this paper uses a unique -perfect information‖ model to examine, from a strategy point of view, the relationship between the market value of the firm and its intrinsic, or DCF, value. Although the research is at the level of the firm, the results have implications at the level of individual strategies and projects, since a firm can be conceptualized as a collection of projects. The findings highlight the relationship between the value of growth options and macroeconomic conditions, industry characteristics, and firm-specific factors.

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Risk measures in strategic management research: auld lang syne?

Cited by 196 publications

References 178 publications

Strategic Risk Management

Strategic Risk Management

Organization-Wide Broad-Based Incentives: Rational Theory and Evidence.

Strategic Implications of Valuation: Evidence from Valuing Growth Options

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