The discussion contained in the preceding chapter demonstrated that during the past twenty years researchers in strategy and in a range of strategy-related disciplines have developed a paradigm of risk that has found wide-spread use, if not whole-hearted acceptance, among strategy theorists. As discussed in Chapter 2, this paradigm looks at risk in terms of fluctuations of outcomes and has usually been operationalized in terms of a variance-based measure of some sort. Unfortunately, not only have the predominate measures of risk in the literature been shown to be lacking, in the course of elaborating and using this paradigm of risk researchers have failed to determine if the paradigm parallels common managerial usages of the idea of risk. In spite of all of the research which has been directed toward developing a reasonable general model of risk, an underlying problem, of special interest to strategy theorists and practitioners, remains: What is risk in a strategic context, how can it be conceptualized, and how, given such a conceptualization, can strategic risk be measured? This chapter will address these issues in a state-defined context.
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