Organizational Slack Research Articles

Risk And Return: New Insights For Theory, Measurement And Management

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: Times New Roman;"><span style="font-size: 10pt;">This study investigates the risk-return relationship by using an ordinal strategic risk measure of risk rather than the more conventional variance-based measures. A set of </span><span style="font-size: 10pt; mso-ansi-language: EN-GB;" lang="EN-GB">hypotheses</span><span style="font-size: 10pt;"> is specified linking ordinal strategic risk, return, and organizational slack. Empirical results are interesting in that they allow elaborating the idea that strategic risk may have a positive effect on subsequent performance and that performance has a negative effect on subsequent risk. Such a self-correcting cycle offers an interesting contrast to the “vicious circle” proposed by previous risk-return research based on prospect theory. Overall, this paper suggests that new conceptual and methodological risk approaches are needed to better understand the risk taking process in organizations.</span></span></p>

Innovativeness of Industry Considering Organizational Slack and Cooperation

The purpose of this research study is to evaluate the influence of a company's cooperation resource availability on its innovativeness. 229 companies in the Manufacturing Industry segment were analyzed. Descriptive statistical analysis associated to regression analysis was used in order to achieve the research objective. Based on analysis of the data, it has become evident that the existence of organizational slack, as well as that of cooperation, positively influence a company's innovativeness, resulting in superior performance. Additionally, the quantitative research permitted the proposition of a predictive model which is applicable to the industry.

Organizational Slack And Performance: The Impact Of Outliers

<p class="MsoBodyText" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: black;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">Extending initial theory development and empirical studies conducted in the early 1980s, the investigation of the relationship between slack resources and the performance of the firm has experienced renewed attention.<span style="mso-spacerun: yes;">  </span>Over the past 25 years enough empirical research has been conducted that researchers have begun to question the frequently found ambiguous results.<span style="mso-spacerun: yes;">  </span>We assess the impact statistical outliers may have on the relationship between organizational slack and firm performance trying to determine whether the positive, curvilinear, or ambiguous results that have been reported are impacted by the presence of outliers.<span style="mso-spacerun: yes;">  </span>We found that the measures of organizational slack were highly variable due to five general factors. When the outliers, extreme values, were statistically identified and removed, the relationship between organizational slack (Available Slack) and performance (ROA) became non-linear and consistent over years.<span style="mso-spacerun: yes;">  </span>Implications suggest that future research should consider the potential impact that non-normal distributed data could have on the validity of findings, particularly when employing data from archival sources. Suggestions for future research in the slack-performance relationship are offered.</span></span></span></p>

Organizational Slack and Knowledge Creation in Product Development Projects: The Role of Project Deliverables

Our concern is with how changes in organizational slack affect knowledge creation in product development projects. We operationalize a change in organizational slack as changed possibilities to depart from project deliverables in NPD projects. Through case research in high velocity industries we identify the effect a change in organizational slack has on knowledge creation processes inside product development projects. In particular we highlight the effects on tacit and explicit knowledge. More specifically we find that reduced slack creates a focus on explicit knowledge rather than tacit knowledge, which may reduce the ability to create knowledge creation and ultimately to innovate.

Radical innovation in a small firm: a hybrid electric vehicle development project at Volvo Cars

The potential paradigmatic shift in technology from the internal combustion engine to electric propulsion via hybrid electric vehicles (HEVs) has been addressed by most automakers, and has produced very different outcomes. This paper uses the framework of core capabilities to discuss how the small automaker, Volvo Cars, made substantial progress in its HEV development using an approach based on limited resources and a low risk. A comparison with Toyota's successful but very resource-demanding Prius project reveals some factors contributing towards rapid development in a context of limited resources, including focused project objectives, tight collaboration with suppliers of the new technologies, reuse of existing technologies and an unaggressive, bottom-up approach to change the firm's values and norms and other core capability dimensions. This paper provides an empirical illustration of how a small company in a mature industry worked with radical innovation in a development project drawing on the combination of organizational slack, entrepreneurial employees and an extensive use of external (knowledge) suppliers.

A stochastic DEA study of hotel efficiency

This current study is the first to apply Stochastic Data Envelopment Analysis (SDEA) approach to assess the efficiency of hotels. The determinants of hotel efficiency were also investigated employing the Tobit regression model approach. The SDEA results show that the SDEA efficiency measures are higher than the deterministic ones and the greater the stochastic variability of outputs, the closer the envelope moves successively to any given observation and the efficiency score approaches one. The optimal solution to SDEA involves the presence of some buffer (slack) of all outputs. In applications involving practice production situation, such buffer (slack) can be interpreted as the firms' need to hold inventory, excess capacity and organizational slack against stochastic uncertainty of market environment. Our results also indicate that resort hotels achieve better efficiency than those in metropolitan areas and operating as part of a chain is not the main determinant of the efficiency of international tourist hotels in Taiwan.

Real options in multinational decision-making: Managerial awareness and risk implications

This paper addresses the theme of real options decision-making in multinational corporations (MNCs) and stresses the role of real options attention and managerial learning in company performance. Using a sample of 278 large MNCs with categorised degrees of managerial real options awareness, we examine the risk implications of switching options in multinational operations, and explore the extent to which the real options logic can be classified as “best practice” in decision-making and risk management. Our results reveal that MNCs which have high managerial awareness about their real options are able to reduce their downside risk through multinationality, organisational slack and other firm characteristics. This finding does not apply fully to MNCs without evidence of such an awareness. Also, although real options awareness does not systematically guarantee lower downside risk from operations, supplementary results indicate that MNCs with evidence of significant investment in the acquisition of real options knowledge tend to outperform competitors that are unaware of their real options. This suggests that if real options are explored and exploited appropriately, real options decision-making can result into superior performance for MNCs in the long-term.

Medical Home Infrastructure: Effect of the Environment and Practice Characteristics on Adoption in Virginia

This study examined whether environmental factors and practice characteristics influence the existence of patient-centered medical home elements in family practices in Virginia. The study used multiple secondary data sets to measure the external environment and a survey of family practices to enumerate and describe medical home elements and practice environment. Results show a positive association between organizational slack, organizational relationships, and stakeholder expectations on the existence of medical home elements. A negative association was found between competition and medical home elements. Medicare and managed care penetration were not associated with medical home elements. The ability or willingness, or both, of family practices to innovate along the patient-centered medical home model is constrained by important institutional and resource dependencies, and policy makers should take these constraints into account if there is to be widespread adoption of a medical home approach to fee-for-service practices.

A Behavioral Model of Innovative Search: Evidence from Public Hospital Services

This article examines the generative mechanisms and underlying contingencies of innovative search. Extending behavioral arguments to the public sector context, it proposes that changes in innovative activity reflect either of two organizational search processes. The first process, commonly known as problemistic search, is triggered by negative performance feedback and initiated to identify appropriate solutions for the performance problem at hand. The second process is known as slack search. It is driven by the availability of excess resources, which decision makers seek to employ most fruitfully. In addition to these fundamental driving forces of innovative search, the proposed behavioral model attributes important moderating roles to organizational slack and regulatory endorsement. In particular, it suggests that public service organizations with high levels of available slack are most likely to engage in problemistic search following perceived performance shortfalls. Similarly, it is assumed that problemistic search is most salient among organizations with full regulatory endorsement. Conversely, when endorsement is low, slack search gains in importance. These behavioral propositions are tested based on novel panel data from the entire population of public nonspecialist hospital organizations in the English National Health Service. Findings from fixed-effects panel regression analyses offer broad support for the proposed behavioral model of innovative search, which has important implications for public administration research and practice. ‘‘The concepts needed for a theory of decision making by political organizations are not strikingly different from those needed in dealing with the firm’’ (Cyert and March 1963, 198).

The Impact of Intergovernmental Grants on Cost Efficiency: Theory and Evidence from German Municipalities

In this paper we use a simple bureaucracy model of fiscal illusion to analyse the impact of intergovernmental grants on the cost efficiency of local jurisdictions. We find that a higher degree of redistribution within a system of fiscal equalisation or an increase in the amount of grants received by a local jurisdiction leads to an extension of organisational slack or X-inefficiency in that jurisdiction. This theoretical prediction is tested by conducting an empirical analysis using a broad panel of German municipalities. The results of the empirical analysis are consistent with the theoretical findings and therefore support the existence of a negative incentive effect of intergovernmental grants on local authorities' cost efficiency.

The impact of technological diversity and organizational slack on innovation

This article examines the effects of technological diversity and organizational slack on innovation performance. Negative binomial regression is used to test the hypotheses in a panel data of 2745 cases. The results indicate that there is an inverse U-shaped relationship between technological diversity and innovation performance. Moreover, the moderating role of organizational slack is recognized and absorbed slack positively moderates while unabsorbed slack negatively moderates the effect of technological diversity on innovation performance. Managerial implications and future research directions are discussed.

Curvilinear Relationship Between Organizational Slack and Firm Performance: Evidence from Chinese State Enterprises

In this project, I undertake this empirical study on the role of organizational slack among State-owned enterprises in China. I report empirical evidence based on a large data set (1995-1996) from the Chinese government archive, consisting of all Chinese large and medium SOEs. Results indicate that slack resources, regardless of the degree to which they have been committed in the production process, have contributed positively to firm performance. I also found that such an impact is curvilinear, resembling inverse parabolic curves. Research and practical implications are discussed.

Organizational Slack and Firm Performance During Economic Transitions: Two Studies from an Emerging Economy

How does organizational slack affect firm performance? Organization theory posits that slack, despite its costs, has a positive impact on firm performance. In contrast, agency theory suggests that slack breeds inefficiency and inhibits performance. The empirical evidence, largely from developed economies, has been inconclusive. Moreover, little effort has been made to empirically test whether such an impact (positive or negative) is linear or curvilinear. This article joins the debate by extending empirical work to the largely unexplored context of economic transitions. Specifically, two studies, based on survey and archival data (N = 57 and 1532 firms, respectively), are undertaken in China’s emerging economy. Our results suggest (1) that organization theory generates stronger predictions when dealing with unabsorbed slack, and (2) that agency theory yields stronger validity when focusing on absorbed slack. Furthermore, we also find that the impact of slack on performance is curvilinear, which resembles inverse U-shaped curves. Overall, our findings call for a contingency perspective to specify the nature of slack when discussing its impact on firm performance.

Just Breathe: Meditation as Organizational Slack

This research posits meditation can be viewed and incorporated into organizations as available slack. Viewing meditation as slack changes the traditional notions and views of slack and integrates independent research streams into a new theoretical lens and organizational paradigm. Organizations utilize slack as a cushion against external and internal contingencies, with research showing a positive correlation between slack and innovation. Organizations also recognize mindfulness cultivates creativity and innovation producing positive benefits. Meditation is recognized as achieving mindfulness and other benefits on the micro and macro level, including better health and less stress. Thus, a new theoretical model is presented showing meditation can be utilized by organizations as slack, providing a buffer against external and internal issues affecting organizations and encouraging innovation.

Knowledge Life Cycle, Knowledge Inventory, and Knowledge Acquisition Strategies*

ABSTRACTFor a knowledge‐ and skill‐centric organization, the process of knowledge management encompasses three important and closely related elements: (i) task assignments, (ii) knowledge acquisition through training, and (iii) maintaining a proper level of knowledge inventory among the existing workforce. Trade‐off on choices between profit maximization in the short run and agility and flexibility in the long term is a vexing problem in knowledge management. In this study, we examine the effects of different training strategies on short‐term operational efficiency and long‐term workforce flexibility. We address our research objective by developing a computational model for task and training assignment in a dynamic knowledge environment consisting of multiple distinct knowledge dimensions. Overall, we find that organizational slack is an important variable in determining the effectiveness of training strategies. Training strategies focused on the most recent skills are found to be the preferred option in most of the considered scenarios. Interestingly, increased efficiencies in training can actually create preference conflict between employees and the firm. Our findings indicate that firms facing longer knowledge life cycles, higher slack in workforce capacity, and better training efficiencies actually face more difficult challenges in knowledge management.

The Effects of Student Syndrome, Stress, and Slack on Information Systems Development Projects

This research attempts to identify how Agile systems development methodologies like SCRUM are affected by three behavioural issues - student syndrome, team member stress and organisational slack. The student syndrome applies when humans start tasks as late as possible and waste safety margins thus increasing time pressure and stress levels. Stress can be both good and bad in a project situation. Stress levels that exceed an optimum level result in decreased performance and eventual burnout, whereas stress levels that were below a minimum level result in decreased performance. Organizational slack is a measure of “busyness” and is relates to staff being 100% scheduled. This is viewed as a short-term strategy which can negatively affect longer-term change and reinvention. These three issues can affect project productivity and project outcomes. This research analyses how these three behavioral issues affect plan-based development approaches and agile approaches (specifically SCRUM) in terms of team productivity and project outcomes. This paper describes these behavioural issues and how they could affect a typical systems development project. Four research questions were derived to be used in the next phase of the research. This next phase will identify a suitable student project which will be completed by an undergraduate student team using a traditional project approach at the same time as a post-graduate project team using SCRUM.

Modes of international external technology innovation: evidence from a global sample

We investigate the factors that may influence a firm's choice of external technology innovation in foreign countries based on the eclectic theory. With a sample of 1,094 overseas R&D collaborations in 42 countries by US companies, we examine the impact of three firm-level ownership endowments – technological competency, organisational slack, as well as location factors on such decisions. Our results show that industry relatedness between US companies and their overseas partners demonstrates significant moderator effects. Also, when expanding into culturally distant nations, US multinationals are much more likely to form R&D joint ventures or non-equity alliances than corporate venture capital investments.

IMPLEMENTING BEST PRACTICES TO SUPPORT CREATIVITY IN NPD CROSS-FUNCTIONAL TEAMS

The use of cross-functional teams increases creativity in new product development leading to shorter development time and higher product innovativeness. Research in new product development has identified a number of organisational practices associated with supporting organisational creativity in cross-functional teams including frequent and open communication, building organisational slack, attitude to risk and top management commitment. Using a single case study approach, this paper explores the challenges associated with the implementation of such organisational practices in the R&D department of a large telecommunication company. Challenges include sequential involvement of functions in the team, broken communication between different teams, management attitude to resource constraints, and short-term management focus on incremental innovation.

The rise and fall of WebTrust

While prior research mainly focused on the impact of third-party-certified web assurance seals on consumers' perceptions and purchasing behaviors, little research has been conducted on the managerial decision-making process about the selection, implementation, and the abandonment of such seals. Of particular interest here is the WebTrust seal, jointly developed by the AICPA and the CICA. We take a qualitative case study approach to understand the motivations and rationale of a large North American telecommunications firm's management behind the decisions about the selection, implementation, and abandonment of its WebTrust seal. Our case firm was one of the first to obtain the seal on its online shopping website. Semi-structured interview results suggest that the implementation and the subsequent abandonment of WebTrust may be explained by several theoretical frameworks — the managerial accounting perspective, organizational slack theory, innovation theory, and institutional theory. First, the case firm's leader attitude in innovation, its extra resources available, coupled with the endorsement of the accounting profession led to the implementation of WebTrust. Second, when the benefits of WebTrust versus its costs were questioned and other companies increasingly abandoned the seal, our case firm decided to follow this trend.

Legitimacy, Visibility, and the Antecedents of Corporate Social Performance: An Investigation of the Instrumental Perspective

Using institutional theory as the foundation, this study examines the role of organizational visibility from a variety of sources (i.e., slack visibility, industry visibility, and visibility to multiple stakeholders) in influencing corporate social performance (CSP). The conceptual framework offers important insights regarding the instrumental motives of managers in performing CSP initiatives. Based on a sample of 124 S&P 500 firms, the authors found that it is a firm’s visibility to stakeholders, rather than its economic performance, that has the larger impact on managers’ decisions regarding how much CSP their firms exhibit. The results show that more profitable firms may not be motivated to engage actively in CSP unless they are under greater scrutiny by various firm stakeholders. The authors also found that organizational slack (estimated as cost of capital) is positively associated with a Social CSP dimension but negatively associated with a Strategic CSP dimension. This research contributes to the current CSP literature by demonstrating that motivations in addition to normative or ethical ones may be at play in the decisions firms make regarding their CSP.