Give Them Some Slack! Examining the Benefits of Slack in the Context of Strategic Change

Abstract

Following calls for the contextualization of the relationship between slack resources and firm performance, we introduce the strategic change context as a setting in which the benefits of holding slack are likely to outweigh the costs. Specifically, we argue that periods of strategic change represent contexts in which firms can meaningfully deploy human resource (HR) slack to address the many requirements associated with maintaining current routines while shifting and restructuring the firm’s operations to accommodate new markets. Moreover, we suggest that financial slack is likely to complement HR slack in this context, allowing for investment into human resources to close gaps between workforce capabilities and the organization’s varied and changing needs. We test our hypotheses using data on US commercial banks from 2002 to 2014. We contribute to research on slack and to the resource management literature.