On strategic trade-offs: does the principle of energy conservation explain the trade-offs law?
Management Research Review
Cumulative capabilities, External trade-offs, Internal trade-offs, Law of energy conservation, Performance frontiers, Strategic trade-offs
Purpose: The purpose of this paper is to reaffirm the suggestion that there are at least two distinct types of laws of trade-off that affect all firms and, in doing so, to contribute toward resolving the persistent trade-off debate in the literature. Design/methodology/approach: Conceptual study using implicit deductive reasoning. Findings: Two types of trade-offs are identified: “internal” can be understood following the dictates of the law of diminishing returns, while “external” can be modeled using the principle of energy conservation. Research limitations/implications: New insights are provided by discussing the impact of both laws of trade-off on the resource-based view of the firm, on new capabilities such as sustainability and innovativeness and on key strategic choices. Practical implications: The study explains why trade-offs occur and outlines contextual factors that determine the “strength” of the trade-offs. Originality/value: To the best of the authors’ knowledge, no previous study has attempted to investigate the topic of strategic trade-offs on the basis of the principle of energy conservation.
Thürer, M., Stevenson, M., Sarmiento, R., & Gianiodis, P. (2017). On strategic trade-offs: does the principle of energy conservation explain the trade-offs law?. Management Research Review, 40 (11), 1163-1174. https://doi.org/10.1108/MRR-09-2016-0214