Abstract
The relationship between slack resources and innovation is complex, with the literature linking slack to both breakthrough innovations and resource misallocation. We reconcile these conflicting views by focusing on a novel mechanism: the role slack time plays in the endogenous allocation of time and effort to innovative projects. We develop a theoretical model that distinguishes between periods of high- (work weeks) versus low- (break weeks) opportunity costs of time. Low-opportunity cost time during break weeks may induce (1) lower quality ideas to be developed (a selection effect); (2) more effort to be applied for any given idea quality (an effort effect); and (3) an increase in the use of teams because scheduling is less constrained (a coordination effect). As a result, the effect of an increase in slack time on innovative outcomes is ambiguous, because the selection effect may induce more low-quality ideas, whereas the effort and coordination effect may lead to more high-quality, complex ideas. We test this framework using data on college breaks and on 165,410 Kickstarter projects across the United States. Consistent with our predictions, during university breaks, more projects are posted in the focal regions, and the increase is largest for projects of either very high or very low quality. Furthermore, projects posted during breaks are more complex, and involve larger teams with diverse skills. We discuss the implications for the design of policies on slack time. The online appendices are available at https://doi.org/10.1287/orsc.2018.1215 .
Highlights
The relationship between slack resources and innovation is complex, with the literature linking slack to both breakthrough innovations and resource misallocation. We reconcile these conflicting views by focusing on a novel mechanism: the role slack time plays in the endogenous allocation of time and effort to innovative projects
The relationship between slack resources and innovation is complex, with the literature linking slack resources to breakthrough innovations and increased experimentation (Cyert and March 1963, Thompson 1967, Bourgeois 1981, Levinthal and March 1981), and to individuals and teams becoming less selective and disciplined about the projects they work on (Cyert and March 1963, Leibenstein 1969, Fama 1980, Staw et al 1981, Jensen 1986, Jensen et al 1994). This poses a challenge for organizations that want to encourage innovation to increase their productivity and competitiveness and worry that introducing slack may negatively distort the allocation of time and effort across the organization. We build on this tension, but identify a novel driver for the effects observed in the literature by focusing on how slack time shapes the allocation of resources to innovative projects
Whereas we incorporate this tension between the positive and negative effects of slack from the literature, we focus on a new, understudied mechanism through which an increase in slack time can shape the allocation of time and effort to innovative projects: the opportunity cost of time
Summary
The relationship between slack resources and innovation is complex, with the literature linking slack resources to breakthrough innovations and increased experimentation (Cyert and March 1963, Thompson 1967, Bourgeois 1981, Levinthal and March 1981), and to individuals and teams becoming less selective and disciplined about the projects they work on (Cyert and March 1963, Leibenstein 1969, Fama 1980, Staw et al 1981, Jensen 1986, Jensen et al 1994). The results highlight that a sufficient amount of time (in contiguous blocks, in particular) is critical for implementing high-potential and complex projects, and that “overlapping slack” is important when ideas benefit from teams with diverse skills This is consistent with recent shifts from spread-out forms of individual slack time (e.g., Google’s 20% time) to more structured programs that provide teams of employees with longer, continuous blocks of time off from regular commitments (e.g., Google’s “Area 120”).
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