My solution was that I needed to re-register Microsoft Word.
Reference on command switches for MSWord startup from Microsoft: How to use startup command line switches to start Word 2010, Word 2007, Word 2003, Word 2002, and Word 2000
In brief, open a command shell at the location of your Microsoft Office and execute: winWORD.EXE /r
Note: /r means re-register of Word in the Windows registry.
For example: if your office is located in C:\Program Files\Microsoft Office\Office12
Then: Go to Start->Run, and paste following line in the commandline box.
"C:\Program Files\Microsoft Office\Office12\winWORD.EXE" /r
A progress modal will appear and will run the registration process; wait until the configuration is finished, and re-open Word. Then close Word and double click on a file in File Explorer to see if it now opens with no error.
Hope this helps.