Financial Slack, Strategy, and Competition in Movie Distribution

Abstract

Organizations that enjoy some slack are believed to make good use of it in their strategic decisions. Using panel data on firms in the U.S. film distribution industry between 1985 and 2007, this article examines how financial slack affects the volume of new product introductions, the competitive strategies for those releases, and their economic performance. Unexpectedly successful “sleeper” films are exploited as a source of exogenous financial slack in the econometric analysis. The results suggest that unexpected financial slack leads to more product introductions, less marketing support for the new products, and no improvement in performance. These findings are consistent with an attribution process in which managers attempt to replicate extraordinary success even if it is largely random, providing real-world evidence of a mechanism recently developed in theory and laboratory research.

Less is More, or Not? On the Interplay between Bundles of Slack Resources, Firm Performance and Firm Survival

“…The solution provided by extant research is that ‘an intermediated level of slack is optimal’ (Nohria and Gulati, , p. 603). However, studies still provide ambiguous results, for example showing positive (George, ), curvilinear (Bradley et al, ), and negative (Natividad, ) relationships between financial slack and firm performance.…”

“…Empirical evidence on the extent to which bundles of slack resources affect firm outcomes is scarce because prior research has focused on the independent effects of one (Bradley et al, ; George, ; Greve, ; Lecuona and Reitzig, ; Love and Nohria, ; Mellahi and Wilkinson, ; Natividad, ) or multiple types of slack (Mishina et al, ; Mousa and Reed, ; Vanacker et al, ; Verbeke and Yuan, ; Voss et al, ). Some recent exploratory studies have focused on the impact of resource bundles on firm performance.…”

Box‐Office Demand: The Importance of Being #1

“…A second measure of movie quality is given by average user ratings at IMDb, a proxy that has been used in previous research (e.g., Natividad, [2013]). It should be noted that this variable is only available after the film is released, thus requiring the assumption that the average consumers judgment about the film reflects underlying quality already present at the moment of release.…”

“…Our paper relates to a literature that focuses on estimating the demand for movies (Eliashberg and Shugan [1997], Sawhney and Eliashberg [1996], Elberse and Anand [2007], Elberse [2007], Moul [2007], Einav [2007], Natividad [2013]). Particularly relevant for our research is the work by Moretti [2011], who suggests that the opening weekend matters for a movies subsequent performance through peer consumer effects triggered by either positive or negative initial surprises.…”

The Effect of Innovativeness on the Relationship Between Diversification and Slack

“…These "idle resources" are, therefore, important in providing organizations capabilities to act in ways that are not possible for other organizations poorer in resources (Kim et al 2008). Natividad (2012) and George (2005) maintained that the presence of slack can be used as an enactment of strategies. Lawson (2001) insisted that attempts to reduce slack may be ill-advised; and in a more provoking position, Martinez and Artz (2006) even argued that "it is not possible for a firm to survive long without the presence of resources above and beyond its immediate needs".…”