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

Abstract

Although a significant body of research has investigated the independent effects of distinct types of slack resources, current theoretical and empirical work does not sufficiently clarify how bundles of slack resources affect firm outcomes. Drawing on the resource constraints literature and the slack literature, we investigate how distinct bundles of financial and human resource slack influence firm performance and survival. Using a sample of 4715 European information and communication technology firms, we show that neither parallel resource abundance (having slack in financial and human resources) nor parallel resource constraints (lacking slack in financial and human resources) are optimal for firm performance and survival. However, firms with selective constraints that combine slack in financial resources with constraints in human resources exhibit superior performance without decreased survival prospects. Taken together, this study extends current research by providing a more nuanced view of the relationships between slack resources, firm performance, and firm survival.

CEOs' regulatory focus, slack resources and firms' environmental innovation

“…On the other hand, some scholars have stated that, limited by having fewer resources, firms are forced to innovate, particularly in a competitive environment (Baker & Nelson, 2005;Paeleman & Vanacker, 2015).…”

“…Fussler and James (1996) first defined environmental innovation as a new type of innovation that could help to reduce environmental damage and to create business value for firms at the same time. Some researchers have proposed that the appropriate amount of slack resources can help an organization to adapt to a rapidly changing environment, and to execute timely strategic adjustment and change (Azadegan, Patel, & Parida, 2013;Lee, 2011;Parida & Örtqvist, 2015), while others have suggested that organizations should reduce slack resources to minimize operational costs (Baker & Nelson, 2005;Paeleman & Vanacker, 2015). Specifically, environmental innovation refers to new products, processes, systems, services and procedures that aim to reduce the consumption of resources and environmental pollution (Cheng, Yang, & Sheu, 2014;Reid & Miedzinski, 2008).…”

“…Therefore, existing research has not reached a consensus on the role of slack resources. Some researchers have proposed that the appropriate amount of slack resources can help an organization to adapt to a rapidly changing environment, and to execute timely strategic adjustment and change (Azadegan, Patel, & Parida, 2013;Lee, 2011;Parida & Örtqvist, 2015), while others have suggested that organizations should reduce slack resources to minimize operational costs (Baker & Nelson, 2005;Paeleman & Vanacker, 2015).…”

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

“…The forms of slack, such as financial, operational, and human resource, were also identified for the additional tests. Human resource slack was most commonly measured by the ratio of numbers or cost of employees to firm sales or assets (Lecuona and Reitzig, ; Mishina et al, ; Paeleman and Vanacker, ; Vanacker et al, ), but sometimes also measured by the ratios of specific groups of employees within the firm (Powell, ; Voss et al, ). Following Voss et al’s () conceptualization of operational slack as unused or underutilized operational resources, we classified operational slack into capacity‐related expenses (e.g., SG&A and inventory) or PPE, often relative to sales or assets (Hendricks et al, ).…”

Organizational Slack, Corporate Social Responsibility, Sustainability, and Integrated Reporting: Evidence from Korea

“…Organizational slacks include financial and human resource slacks [17]. Prior research [18,19] has focused on slack in these two resources, which are closely related to firms' emergence and development. Financial slacks usually represent unabsorbed slack that is currently uncommitted and available for redeployment [19], such as cash and receivables that are highly flexible and can be disbursed on managerial discretion.…”