Abstract for: Dynamic Risk Assessment on Innovation Risks in the German Machinery and Plant Engineering Industry

For today’s companies innovation becomes more and more the source of strategic dif-ferentiation or cost leadership. Challenging competition, frequent changes in their envi¬ronments increases increase complexity in innovation management significantly. Therefore, deviations from companies’ innovation objectives, commonly known as inno¬vation risks, are also rising. They result from complex structures and can be modelled in risk nets. Theory and managers understand that risks are interrelated; nevertheless the portfolio of innovation risks manages the risks separately. This limits the understanding of the dynamic behavior in risk nets. Simulations based on statistical approaches are already approved und used for risk analysis identifying, valuating and aggregating the risks. The limitations of these methods can be overcome by using System Dynamics to gain new insights into the behavior of risk nets. In the research project cause-and-effect relations and the dynamics of innovation risks are investigated in the German machin¬ery and plant engineering industry. With the support of the German Engineering Associ¬ation and leading companies in the industry this research demonstrates the potential of System Dynamics for a holist holistic risk assessment of Innovation risk and develops a risk net of the main innovation risks in the industry.