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Dynamic and risk measurement perspectives on bowman's risk‐return paradox for strategic management: An empirical study

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  • Avi Figenbaum
  • Howard Thomas

Abstract

Bowman's (1980, 1982) widely quoted papers have reported the existence of a risk‐return paradox for strategic management. In this paper the authors examine the dynamic behavior of the risk‐return relationship and analyze whether the risk‐return paradox is stable across time. The analysis involves tracking Bowman's so‐called negative association ratio across time. Using accounting measures of risk and return, it is demonstrated that while the paradox holds during the 1970s, the finding does not hold in the environment of the 1960s. Further, the paradox disappears if market‐based risk measures are used. Some implications for strategic management are then discussed and attention is directed towards the meaning of risk in the context of strategic management. In addition, possible explanations for this paradox are evaluated and directions for further research are suggested.

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  • Avi Figenbaum & Howard Thomas, 1986. "Dynamic and risk measurement perspectives on bowman's risk‐return paradox for strategic management: An empirical study," Strategic Management Journal, Wiley Blackwell, vol. 7(5), pages 395-407, September.
    • Handle: RePEc:bla:stratm:v:7:y:1986:i:5:p:395-407
    DOI: 10.1002/smj.4250070502
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    Cited by:

    1. Li, Xu & Vermeulen, Freek, 2021. "High risk, low return (and vice versa): the effect of product innovation on firm performance in a transition economy," LSE Research Online Documents on Economics 120268, London School of Economics and Political Science, LSE Library.
    2. Yan Li & Neal M. Ashkanasy, 2019. "Risk adaptation and emotion differentiation: An experimental study of dynamic decision-making," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 219-243, March.
    3. Michael Carney & Marc Van Essen & Eric R. Gedajlovic & Pursey P.M.A.R. Heugens, 2015. "What do we know about Private Family Firms? A Meta–Analytical Review," Entrepreneurship Theory and Practice, , vol. 39(3), pages 513-544, May.

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