On strategic trade-offs: does the principle of energy conservation explain the trade-offs law?
2017
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.
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