Engaging in new and more research-oriented R&D projects: Interplay between level of new slack, business strategy and slack absorption

Abstract

We investigate the role of slack absorption in conjunction with Miles and Snow business strategies on the influence of the amount of newly generated financial slack on R&D. The new slack resources refer to exogenously created financial slack induced by a wage subsidy in favour of highly qualified researchers in R&D. We demonstrate that the matter of whether slack is considered absorbed or unabsorbed influences the strength and shape of the interaction between business strategy, the amount of new slack resources, and engagement in additional R&D projects and a shift toward more research in these projects. These insights help to better understand the relation between slack resources and managerial decisions in terms of R&D investment.