Give Them Some Slack—They’re Trying to Change! The Benefits of Excess Cash, Excess Employees, and Increased Human Capital in the Strategic Change Context

Bentley, Frederick Scott; Kehoe, Rebecca R.

doi:10.5465/amj.2018.0272

Cited by 82 publications

(70 citation statements)

References 80 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Because of the conflicting theoretical arguments, scholars have suggested that other factors, combined with organizational slack, may have a joint impact on firm performance. Aligning with this line of inquiry, extant studies have found that firms with high levels of organizational slack outperform in hostile environments (Bradley et al, 2011), highly competitive markets (Lecuona and Reitzig, 2014), transitional economies (Banalieva, 2014) or in the context when a firm takes strategic changes (Bentley and Kehoe, 2020). When the COVID-19 pandemic has caused vast economic breakdown and generated intense pressures for firms in various industries, exploring the role of organizational slack in this pandemic context for the manufacturing industry will yield insightful findings.…”

Section: Introductionmentioning

confidence: 91%

Exploring the role of organizational slack in the COVID-19 pandemic: an empirical study of the manufacturing industry

2021

View full text Add to dashboard Cite

Purpose Drawing on the behavioral theory of the firm (BTF), this study aims to understand the role of organizational slack in the manufacturing industry during the COVID-19 pandemic. Design/methodology/approach Using panel data of publicly traded manufacturing firms in the USA over a 12-quarter time period, this study uses generalized least squares modeling to test the hypothesized relationships. Findings Results show that the COVID-19 pandemic has a negative impact on manufacturing firms’ performance and organizational slack weakens the negative relationship between the COVID-19 pandemic and firm performance. In addition, when a positive performance aspirational gap (PAG) exists, the negative relationship between COVID-19 pandemic and firm performance in firms with high levels of organizational slack is further weakened. Originality/value This study contributes to organizational studies by investigating the contingent impact of organizational slack in the setting of COVID-19 pandemic. This study also contributes to the BTF by investigating how firm PAG, combined with the abundance of organizational slack, moderates the impact of COVID-19 pandemic on firm performance.

show abstract

Section: Introductionmentioning

confidence: 91%

Exploring the role of organizational slack in the COVID-19 pandemic: an empirical study of the manufacturing industry

2021

View full text Add to dashboard Cite

show abstract

“…To further establish the generalisability of our results, future research could replicate this study in other industries and/or other institutional contexts (Ritter-Hayashi et al, 2020; Vanacker et al, 2017). Moreover, future research should examine the effect of downsizing on other organisational outcomes such as firm survival and performance (Bentley and Kehoe, 2020). Finally, this study adopts an output perspective of innovation.…”

Section: Discussionmentioning

confidence: 99%

The effect of downsizing on innovation outputs: The role of resource slack and constraints

Ramdani

Guermat

Mellahi

2020

Australian Journal of Management

View full text Add to dashboard Cite

Although the practice of downsizing is prevalent, its effects on organisational outcomes remain poorly understood. This article examines how and when downsizing affects organisational innovation. Using a unique data set of UK firms over a period of 22 years, we test the effect of downsizing on innovation outputs by considering the moderating role of resource slack and constraints. We argue and empirically demonstrate that downsizing has a dual effect on innovation, contingent on the firm’s level of resources. Our results reveal that downsizing affects innovation outputs positively in firms experiencing resource slack and negatively in firms experiencing resource constraints. We also show that the effect is more immediate in resource-constrained firms. Theoretical and managerial implications of these results are discussed. JEL Classification: J63, L25, M51, O32

show abstract

“…Unabsorbed slack (e.g., cash or liquidities) has high liquidity without being earmarked for a specific use and can be made freely available to firms to protect their core and even develop new capabilities, especially in environment shock context [32,34]. Another approach is to examine the impact of context in the relationship between slack and firm performance [35,36]. For example, researchers consider the effect of slack in different contexts and factors that refer to environmental threat [4], environmental complexity [24], and industry factors [11,13] and argue that environmental contexts create the need for which slack can be applied.…”

Section: Slack Resourcesmentioning

confidence: 99%

“…, and provide flexibility in the face of unknown environments [42]." Cash and other unabsorbed slack are uncommitted resources that are available freely as required, and their high discretion signifies high availability of resources with the broadest capacity necessary for developing new capabilities [13,32,34,35]. Especially, environmental shocks often raise resource prices, and a large amount of cash or other unabsorbed reserves can also ease cost pressure.…”

Section: Environmental Shock and Effects Of Slackmentioning

confidence: 99%

Does Slack Buffer? Market Performance after Environmental Shock

Zhang

2021

Sustainability

View full text Add to dashboard Cite

Slack is a resource held by a firm but exceeds its needs. It is crucial for a firm to raise more attention on slack when facing environmental shocks, which are one of the causes of unsustainability. Based on agency theory and behavioral theory, this paper analyzes the buffer effect of slack on market performance under different periods and degrees of environmental shocks. Taking two major earthquakes that occurred in China as the natural experimental background and the listed firms in hit areas as the sample, we find that environmental shock is exposed to acts as a positive contingency for the impact of unabsorbed slack on market performance, and as a negative contingency for absorbed slack’s effect. The severity of environmental shock promotes the unabsorbed slack to act as a buffer in the immediate post-shock period and absorbed slack in the during-shock period. These findings contribute to answering the question of how to configure slack to protect firms and even achieve sustainable development when facing environmental shock.

show abstract

Give Them Some Slack—They’re Trying to Change! The Benefits of Excess Cash, Excess Employees, and Increased Human Capital in the Strategic Change Context

Cited by 82 publications

References 80 publications

Exploring the role of organizational slack in the COVID-19 pandemic: an empirical study of the manufacturing industry

Exploring the role of organizational slack in the COVID-19 pandemic: an empirical study of the manufacturing industry

The effect of downsizing on innovation outputs: The role of resource slack and constraints

Does Slack Buffer? Market Performance after Environmental Shock

Contact Info

Product

Resources

About