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Strategic adaptation in complex environments with frequent changes must balance the search for innovative opportunistic ventures and conscious pursuit to achieve established goals and outcomes. This creates a tension between attempted efficiency gains from tight strategic controls that avoid diversion of corporate resources and the facilitation of dispersed initiatives in search for business opportunities. To assess this conundrum, the authors present an interactive strategic control model that combines planning and participative strategy-making with interactive control processes. This combination of management practices arguably creates an adaptive system that drives the upside performance outcomes from a guided adaptation of opportunistic insights. Various hypotheses are developed and tested based on survey data from among the 500 largest firms in Denmark. The results suggest a direct relationship between interactive controls, strategic planning, and participative leadership on upside performance outcomes. Moreover, the positive effect from interactive controls on the upside potential is enhanced by participative decisions.

Today, long-term success requires firms to sense changes in their environments early and react efficiently to them. Increasing middle managers’ participation in decision-making about market-related and product-related questions has been suggested as one way of enhancing this strategic responsiveness; abandoning formal planning, such as annual budgets, has been another. Yet, empirical evidence on the matter is scarce and conflicting. Drawing on data from Denmark’s 500 largest firms, we show that participation of middle managers in decision-making about new products and markets to serve, in-deed, increases firms’ strategic responsiveness as assessed by a reduction in firms’ downside risk. However, this effect is not a direct one. Nor does it interact positively or negatively with the emphasis put on formal planning as submitted in literature. Our evidence suggests that emphasis on planning mediates the relation between stronger participation of middle managers in decision-making and the increase in firms’ strategic responsiveness. This has implications for ongoing theory building and practice.

The purpose of this paper is to test the effect of psychological safety and participative leadership style on risk performance as well as its interaction with enterprise risk management (ERM) processes to evaluate if a decentralisation in the form of a safe environment and participative leadership style enhances or crowds out the effect of a centralised-ERM process.

Based on a survey among top-500 Danish companies, the paper tests in SEM the relationships between ERM, participative leadership style and psychological safety on risk performance

The paper finds that not only do both ERM and participative leadership style enhance risk performance but a positive interaction effect is also found. In addition, the findings suggest that a safe environment precede participative leadership style indicating this as a prerequisite for management to introduce participative leadership style. These findings underpin that an effective risk management system should include both a holistic, formalised ERM system and organisational initiatives that enhance a strategic responsiveness through employee involvement.

The current study provides new empirical insights about the effect of a formal ERM process on risk performance as well as cultural factors for ERM success. As something new to the risk management literature, it draws on leadership and employee voice theory and investigates participative leadership style and psychological safety for employee voice as contextual influences on the effect of a formal ERM process on risk performance.