Slack-performance Relationship Research Articles

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

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.

Business Groups’ Internal Labor Markets and the Value of Human Resource Slack

Whether holding human resource (HR) slack creates or destroys value for firms is a hot topic, given that labor shortages and record high attrition rates are disrupting businesses everywhere. Our study adds to this conversation by exploring the so far neglected impact of the embeddedness in business groups on the HR slack–performance relationship. We find that HR slack lowers firm performance at diminishing rates. Further, we show that HR slack has a more negative effect on performance when the focal firm has an increasing number of other group firms in the same sectoral/geographical area—i.e., when the flexibility to share HR with other group companies increases. Our findings expand previous works by highlighting the role of interfirm networks in determining the performance consequences of HR slack for organizations.

How does the economic policy uncertainty affect the relationship between financial slack and firm performance in emerging countries?

This study investigates the moderating effect of economic policy uncertainty (EPU) on the relationship between slack resources and firm performance in emerging countries. By using 47,523 firm‐year observations from seven emerging market economies through the period of 2010–2018, the results show an inverse U‐shaped relationship between slack resources and firm performance. The findings also demonstrate that EPU acts as a negative moderator for the slack–performance relationship. In high EPU environments, the marginal benefit from one additional unit of slack is smaller relative to low EPU environments. This study contributes to the slack resources‐firm performance literature by emphasizing the role of the broader external environment as a moderator.

Understanding the evolution of the slack–performance relationship from a bibliometric perspective

PurposeThe purpose of this paper is to analyse and classify the literature that links slack resources with performance, determining the diversity and coherence within the field, as well as possible future research trends.Design/methodology/approachUsing Web of Science information, a dynamic co-citation and co-word analysis was developed, enabling identification of the theoretical foundations that have accompanied the study of the slack–performance relationship and the research trends associated with these types of resources and their temporal evolution.FindingsDocument co-citation and co-word analysis and its evaluation present a growing diversity of literature but which maintains links to the core works, giving coherence to this research field. The key theoretical approaches remain stable over time but with fragmentation of the topics analysed. Results allowed identification of a number of emerging research trends, achieving a level of consolidation within the field, with research fronts linked to those trends.Originality/valueSlack resources have a large trajectory within the management field. However, it is believed only basic bibliometric analyses of the literature have been made and none has developed an analysis of the evolution. This work is useful not only for incipient researchers to better understand the theoretical bases upon which the current work is based but also for the identification of possible gaps and unanswered research questions. The results complement previous research, with qualitative or meta-analytic perspectives, fundamental in understanding the structure and evolution of this research field.

Environmental complexity, slack, and firm performance

Firms hold excess resources, known as slack, that could be valuable as the environment becomes more complex. This article provides evidence on how higher environmental complexity alters the slack-performance relationship in the long run by introducing three types of effects: the efficiency effect, the profitability effect, and the incentives effect. After measuring those effects on a panel of Colombian firms, we show that firms implement multiple and simultaneous purposeful actions on organizational slack to compete in more complex environments. Depending on the slack type, complexity can encourage the efficient use of slack, it can alter the incentives to hold slack, and it can change the profitability of slack. Those results could be used to answer how efficient or profitable are firms’ levels of slack, and if they have higher incentives to accumulate more slack.

Relationship between slack resources and performance: temporal symmetry and duration of effects

PurposeAlthough slack resources and their relationship to performance have been widely studied in the literature, the temporal symmetry of this relationship, and the duration of its effects, are still unknown aspects and are the objective of this paper.Design/methodology/approachTo evaluate this effect, an exploratory study has been designed on a sample of 449 Spanish industrial companies over a period of 12 years, assessing the impact of idle resources on economic and financial profitability. By means of hierarchical regressions, the short- term, medium- term and long-term effects of slack resources have been evaluated.FindingsThe results show that the impact on performance depends on the type of resource considered. Available slack has a consistent and positive effect on economic profitability in the short term. Other types of slack show persistent effects on performance, but, in the case of the recoverable slack, with a negative sign that contradicts the benefits provided by these resources. Finally, potential slack only has a permanent effect on financial profitability, but the sign changes depending on the economic context under consideration. There are also differences in the duration of the effects according to the type of resources.Originality/valueThis paper advances the knowledge about the slack-performance relationship over time that has been scarcely studied.

Product innovation and employees’ slack time. The moderating role of firm age & size

A growing mass of study has underscored that slack resources are fundamental for innovation. However, empirical research has generated inconclusive findings that have invigorated an ongoing scholarly discussion about which sorts of slack resources are most beneficial to innovation. To resolve this debate, an increasing number of scholars contend that the use of slack resources to explain the slack-performance relationship could be contingent on both the firms’ strategic positions and their firm-level characteristics. In these debates, the slack time has received less attention from scholars. However, while practical usage of slack time by the multinational corporation has been reported to affect performance, the empirical tendency linking it to any objective performance indicators of the firm such as innovation is few. As a result of this, this study conducts a two-way and three-way moderation effect by extracting two generic and most researched firm-level attributes, which are firm age and size to explain the slack-performance relationship of innovative firms. In order to extend the scant literature on slack time, this study draws on the moderating role of both firm age and size. The three-way estimation of slack time-age-size-performance relationship employs a cross-section dataset from the World Bank Enterprise and Innovation Follow-up surveys of 9503 firms in 11 countries of sub-Saharan Africa. The study uses an Instrumental Variable binary treatment model with a direct-2sls for the central estimation, and a Tobit model for the robustness checks. The results of this study reveal that age and size significantly moderate the impact of slack time on innovation. In particular, the findings indicate that the age and size of firms efficiently moderate the slack-performance relationship to support the introduction of innovation. The study further reveals that a three-way estimation of the variables results in a significant decline to the optimisation of firm-level innovation. For experts, the findings offer an essential insight as they reveal how top managers can manage with the allotment of slack time to perhaps specific employees in fostering a compelling introduction of innovation.

How Competitive Action Mediates the Resource Slack–Performance Relationship: A Meta‐Analytic Approach

AbstractThe fungibility of organizational slack provides firms significant latitude in addressing both internal and market pressures. A vast literature suggests that slack influences firm performance; however, the empirical record is mixed, and the underlying mechanism linking slack to performance remains ambiguous. We address these issues by theoretically expanding the slack–performance model to include mediation. Specifically, we develop and test a model in which a firm’s competitive behaviours direct the utilization of slack toward the realization of firm performance. Our meta‐analytic‐based structural equation model supports partial mediation, showing that competitive behaviours provide some resolution to the conflicted understanding of how slack affects performance. Further, we provide value to the slack literature by consolidating the evidence for the effects of various types and forms of organizational slack. Beyond providing robustness to our theoretical model, doing so offers a more complete understanding of how operationalizations of slack and performance outcomes matter.

Organizational structure, slack resources, and corporate social performance

The current research of slack-performance relationship pays attention mainly to a set of overlapping slack natures, such as being sticky or absorbed, without sufficient consideration of variables related to the internal structure of a given organization. We posit that this weakness may prevent us from further understanding how different slack resources (the slacks) influence firm performance. Combining the resource-based view (RBV) of the firm with a perspective of international integration (Taylor, Beechler, & Napier, 1996), we propose a new model explaining how organizational-structure-related variables may interact with the slacks and influence firms¡¯ corporate social performance (CSP). Analyzing data from publicly listed US firms (2000¨C2012), we obtain evidence supporting the importance of organizational integration structure for understanding slack-performance relationship.

Organizational structure, slack resources and sustainable corporate socially responsible performance

AbstractThe current research on the slack–performance relationship pays attention mainly to a set of overlapping slack natures, such as being sticky or absorbed, without sufficient consideration of variables related to the internal structure of a given organization. We posit that this weakness may prevent us from further understanding how different slack resources (the slacks) influence firms' corporate socially responsible performance (CSR). Combining the resource‐based view of the firm with a perspective of international integration, we propose a new model explaining how structural‐related variables may interact with the slacks and influence firms' CSR. Analyzing data from publicly listed US firms (2002–2012), we obtain evidence supporting the importance of organizational integration structure for understanding the slack–performance relationship.

Does strategic planning help firms translate slack resources into better performance?

AbstractIs organizational slack good or bad for firm performance? Research addressing this question has obtained mixed results. Such studies have focused mainly on the impact of environmental conditions on the slack–performance relationship. In this study, instead of focusing on the uncontrollable external environment, we consider actions determined by firms internally, in particular strategic planning. Using data from 183 US firms, we explore the connection between organizational slack and firm performance with different levels of strategic planning. The results suggest that at low levels of strategic planning the slack–performance relationship is linear, while at high levels of strategic planning this relationship is inverse U shaped. We discuss the theoretical and practical implications of these findings.

Slack in family firms: evidence from Italy (2006-2010)

Purpose– The purpose of this paper is to examine the relationship between available slack and firm performance in Italian family-controlled public firms (FCPFs) from 2006 to 2010. In addition the authors analyze the moderating effects of specific board structure variables on the relationship between slack resources and firms’ performance.Design/methodology/approach– A pooled cross-section of family and non-family publicly traded firms was drawn from COMPUSTAT global and matched with corporate governance and family firm variables hand-collected from companies’ standard profiles from Italy's primary stock exchange, Borsa Italiana. The hypotheses were tested using the feasible generalized least square method in order to analyze the data from 583 firms-observations, controlling for self-selection bias and reverse causality.Findings– The study shows that FCPFs with available slack experience less than proportionate increases in performance, suggesting a concave curvilinear slack-performance relationship. However, the slack-performance relationship is contingent on board independence and board size: greater board independence and larger boards in FCPFs relate to higher performance when the firm lacks or has too much slack available. The findings suggest that a balanced approach of oversight and stewardship helps families to make better resources allocation, to the benefit of outside shareholders as well.Research limitations/implications– The slack measure was restricted to available slack. Future studies can expand this research inquiry with other forms of slack, including potential and recoverable slack. The sample included only publicly traded family and non-family firms, thereby limiting the generalizability of the findings to other types of family enterprises. Lastly, the results only attend to the slack-performance relationship by controlling whether the firm's performance is below or above the industry average.Practical implications– Policy makers and non-family stakeholders may rely on the findings better understand the factors that can alter the family's propensity for risks and its related strategic decisions in the Italian context. Procedures to fully monitor family management's decision making or, at the other extreme, to give the family free reign are likely to disadvantage families, their business, and their outside stakeholders.Originality/value– The study reconciles the debate on the role of slack on firms’ performance by proposing a curvilinear relationship. The study is one of only a handful of research inquiries centrally addressing the role of slack in family-owned businesses, and the only analysis focussed on Italian FCPFs.

Empirical Analysis on the Performance of Pharmaceutical and Chemical Firms

This paper examines how organizational slack influences the performance of pharmaceutical and chemical firms by using empirical analysis based on the data get from 47 real firms. The result shows that the relationship between organizational slack and the performance of pharmaceutical and chemical firms is inverse N-shaped, and task orientation moderates this relationship in the same direction. The results broadly demonstrate that relationships differ based on industry circumstances and organizational slack. Additionally, this study is the first to empirically identify an inverse N-shaped relationship between slack and performance, indicating that, in certain industry circumstances, little and much slack is bad for performance. Moreover, this paper also studies the moderating effects of firm management style on the relationship between organizational slack and performance for the first time. Overall, results highlight the importance of additional research into intervening factors impacting the slack–performance relationship

The Relationship between Slack Resources and the Performance of Entrepreneurial Firms: The Role of Venture Capital and Angel Investors

AbstractIn this study, we seek to further delineate factors that condition the relationship between slack resources and firm performance. To do so, we develop and test a model that establishes the role of venture capital (VC) and angel investors as powerful external stakeholders who positively moderate the slack–performance relationship. In addition, we provide more insight into this relationship by examining differences between these two types of private investors and by examining the role of their ownership stakes. We test our hypotheses using a sample of 1215 private firms, including VC‐backed firms, angel‐backed firms, and similar firms without such investors. We find that the presence of VC investors positively moderates the relationship between both financial and human slack resources and firm performance, while angel investors only positively moderate the effect of human resource slack. Further, VC investors are only marginally better at helping entrepreneurs to extract value from human resource slack than angel investors and they are no better when it comes to financial slack. Finally, we find that the impact of financial and human resource slack on firm performance is more positive in VC‐backed firms when investors hold high ownership stakes, an effect which is significantly stronger than when angel investors hold high ownership stakes.

The Impact of Organizational Slack on The Performance of Pharmaceutical and Chemical Firms

The purpose of this paper is to attempt to reconcile previous views of the relationship between organizational slack and performance through examining the impact of organizational slack on the performance of pharmaceutical and chemical firms by using empirical analysis based on the data get from 47 firms in Henan Province. The result shows that the relationship between organizational slack and the performance of pharmaceutical and chemical firms is inverse N-shaped. The results broadly demonstrate that relationships differ based on industry circumstances and organizational slack. Additionally, this study is the first to empirically identify an inverse N-shaped relationship between slack and performance, indicating that, in certain industry circumstances, little and much slack is bad for performance. Overall, results highlight the importance of additional research into intervening factors impacting the slack–performance relationship.

The Impact of Organizational Slack on the Performance of Material Production and Processing Firms

This paper studies the impact of organizational slack on the performance of material production and processing firms by using empirical analysis based on the data get from 54 firms in Henan Province by questionnaire. The result shows that organizational slack is positively related to the performance of material production and processing firms. The analysis also finds that there is the inverted U-shaped relationship between organizational slack and performance, but this relationship is not significant. Overall, results highlight the importance of additional research into intervening factors impacting the slack–performance relationship.

The Relationship between Slack Resources and Performance: An Empirical Study from China

Although organizational research posits various relationships between a firm's slack resources and performance, findings to date have been ambiguous. The purpose of this study is to attempt to reconcile previous views of the relationship between slack resources and performance through employing empirical analysis based on survey data from 47 pharmaceutical and chemical firms in Henan Province of China. The results indicate that the relationship between slack resources and the performance is inverse N-shaped. Results provide evidence of a curvilinear relationship between slack resources and performance and broadly demonstrate that relationships differ based on industry circumstances and slack resources. Additionally, this study is the first to empirically identify an inverse N- shaped relationship between slack resources and performance, indicating that, in certain industry circumstances, little and much slack resources are bad for performance. Overall, results highlight the importance of additional research into intervening factors impacting the slack-performance relationship.

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>

Behind organizational slack and firm performance in China: The moderating roles of ownership and competitive intensity

Extensive studies of the organizational slack–performance relationship offer mixed findings in developed economies while little research attends to transition economies. Replicating and extending earlier work by Tan and Peng (2003), this study examines the relationship between organizational slack and firm performance in China and focuses on the moderating effects of firm ownership and competitive intensity. Empirical findings based on longitudinal data from 60,945 firms during 1998–2002 suggest that the impact of organizational slack on performance is stronger for private enterprises than for SOEs and foreign-invested enterprises. Furthermore, industry competitive intensity positively moderates the effect of organizational slack on performance. In a three-way interaction effect, the moderating effect of competitive intensity on the organizational slack–performance relationship is weaker in SOEs than in private enterprises and foreign invested enterprises.

Slack Resources and the Performance of Privately Held Firms

Empirical findings from publicly traded firms and behavioral arguments suggest a positive influence of resource slack on financial performance. While this area has remained unexplored in privately held firms, conceptual arguments indicate that resource constraints may enhance performance. Longitudinal data on 900 privately held firms confirm the differing influences of forms of slack on performance. Results indicate that a combination of behavioral and resource constraints arguments are necessary to explain the slack-performance relationship in privately held firms. The implications of these findings for theories of resources and entrepreneurship are discussed.