Thurer, Matthias and Stevenson, Mark and Sarmiento, Robert and Gianiodis, Peter (2017) On strategic trade-offs:Does the principle of energy conservation explain the trade-off law? Management Research Review, 40 (11). pp. 1163-1174. ISSN 2040-8269
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Abstract
Purpose The purpose of this paper is to reaffirm the suggestion that there are at least two distinct types of trade-off law that affect all firms; and in doing so, to contribute towards resolving the persistent trade-off debate in the literature. Design/methodology/approach Conceptual; based on implicit deductive reasoning. Findings Two types of trade-offs are identified: one (‘internal’) can be understood following the dictates of the law of diminishing returns, while the other (‘external’) can be modeled utilizing the principle of energy conservation. Research limitations/implications New insights are provided by discussing the impact of both trade-off laws on the resource-based view of the firm, on new capabilities such as sustainability and innovativeness, and on key strategic choices. Practical implications Our study explains why trade-offs occur and outlines contextual factors that determine the ‘strength’ of trade-offs. Originality/value To the best of our knowledge, no previous study has attempted to investigate the topic of strategic trade-offs based on the principle of energy conservation.