Crisis response in an era of Knightian uncertainty

Abstract

The unique impacts to businesses of the Covid-19 pandemic and the war in Ukraine exemplify the need for decision-makers to be prepared not just for foreseeable risks, but those which cannot be anticipated in advance. A century after Knight’s landmark work, this manuscript views crisis management literature through the lens of Knightian uncertainty. Firms and their partners commensurate events, as part of creating an appropriate cognitive framework to understand them. This forms the foundation of sense-making, and the transition from analogical reasoning to experiential learning. A firm’s ability to implement its response depends on flexibility and redundancy in resources, organizational structure, and interorganizational network.