I’m not too sure. The idea is appealing, certainly, but it doesn’t make sense. You’re not thinking on a large enough scale. Attacking a camp will certainly induce fear in those and you won’t have to deal with them for a long time. But if that’s all that happens, then you just go around, build an army, bother everyone around and enjoy the quiet.
The logical consequence is that you have a period of peace (with that faction) until they’re launching an all-in counter attack. I’m speaking about an army, maybe even more. We humans don’t ignore threats or run away from them, we wipe them out. It would only be logical that other races, especially goblins and similar, do the same. Maybe not a huge attack the first time, but slowly and surely you’re certainly making somebody really mad. At that point, your only chance would be to survive and, which is unlikely to happen, “sit it out” until the other faction just dies out.
In my humble opinion, if you deal with these threats and you decide to take the violent road, the only proper solution is that one of you two is gone by the end of the game. If you’re gone, well, so it goes, game over. If the enemy faction is defeated, you’ve won some land and respect or whatever. Of course there’s always a chance for diplomacy, but I’m not sure how deep Radiant wants to go into Civilization.