Risk and the Relationship Among Strategy, Organizational Processes, and Performance

Abstract

Performance is an important variable in strategic management research. But, although managers must deal with performance on two dimensions, its level (return) and the variation in that level (risk), performance has traditionally been studied only in terms of return. This paper reports the results of a study of business strategy content and processes where performance was operationalized as both return and risk. In a field study of 20 firms in the banking industry in one state, different strategies were found to be associated with differences in risk but not in return. The effects of processes on performance were varied; some processes were associated with risk only, some with return only, and others with both risk and return. These results suggest that the relationships among strategy, processes and performance are more complex than most researchers have acknowledged. Further theoretical and managerial insights may be gained into these relationships if risk is included as a dimension of performance in strategic management research.

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