The effect of slack configurations on company performance from a dynamic perspective

Abstract

AbstractThe existing literature on slack resources points to a relationship with organizational performance, though little attention have been given to their dynamic deployment. Arising from the idea that companies present different levels of slack resources, this paper analyzes the slack‐performance relationship using a dynamic performance and configurational approach. We investigate the existence of coherent configurations of slack resources and analyze the generation and use of slack resources in a period of crisis and economic recovery. Seemingly unrelated regressions were used on 419 Spanish manufacturing companies to assess the effect of slack configuration on performance from a cross‐sectional and longitudinal perspective. The results show clear configurations and a continuous slack–performance relationship, so available and potential slack positively affect performance, whereas recoverable slack negatively affects performance, although these relationships are contingent on the economic situation. Therefore, firms increase their available and potential slack when faced with an environmental jolt, whereas this increase varies depending on the configuration or availability of slack resources. Configurational equifinality in the slack–performance relationship is also confirmed, with the effect being contingent on time.