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Commitment is a necessary prerequisite for gaining sustainable competitive advantage. By the way of commitment a firm is able to establish mobility barriers for capital bound in specific assets and to protect thereby supernormal profits against competition by entry barriers. The main underlying mechanism creating commitment is the irreversibility of decisions. Irreversibility not only can give a sustainable competitive advantage but is also a necessary condition for the existence of risk. Even under uncertainty there is no risk if any decision can be completely and costlessly reversed at any time. In that case, strategy and planning for the future are not necessary at all. This reversibility condition is, of course, never completely fulfilled, alone taking into account the passing of time between two points of decision. Commitment is at the heart of competitive advantage and risk; both concepts are of outstanding importance for any firm. The aim of the paper is to analyse potential trade offs between the advantages and disadvantages of commitment and to give an overview of the factors that influence the optimal timing and extent of irreversible investment. The analysis is based upon the concept of sunk costs. Sunk costs measure the irreversibility of investment and constitute an important link between management accounting and strategy.