Slack Resources and the Rent-Generating Potential of Firm-Specific Knowledge

Abstract

We examine how two types of slack resources relevant to knowledge employees—human resource slack and financial slack at the R&D functional level—influence the rent-generating potential of firm-specific knowledge resources. According to the resource- and knowledge-based views of the firm, firm-specific knowledge resources are critical for generating economic rents for a firm. However, without motivated knowledge employees investing in the corresponding specialized human capital in the process of absorbing and deploying firm-specific knowledge resources, the resource potential for rent generation would be greatly discounted. We argue that human resource slack among knowledge employees and financial slack available for R&D activities affect the rent-generating potential of firm-specific knowledge resources by influencing knowledge employees’ incentives to invest in specialized human capital. In particular, while financial slack facilitates rent generation of firm-specific knowledge resources by increasing employee incentives to invest in specialized human capital, human resource slack hinders it by reducing such incentives. Empirical results based on longitudinal R&D employment data, U.S. patent data, and Compustat support these arguments.

Organizational structure, slack resources and sustainable corporate socially responsible performance

“…One was computing the organizational‐level human resources relative to industry‐level average human resources (e.g. Lecuona & Reitzig, ; Mishina et al, ; Vanacker, Collewaert, & Zahra, ), and the other was using organizational‐level human resources minus predicted‐level human resources (Wang, Choi, Wan, & Dong, ). Since our sample covered all publicly listed firms in each industry, using industry‐level information for human resources (the first method) to compute HR slack was more appropriate.…”

The Determinant Factors of Technology Adoption for Improving Firm’s Performance: An Empirical Research of Indonesia’s Electricity Company

“…The raw materials' input to technology's adoption process also includes tangible and intangible assets (Prakash et al 2008). Instead of technology, some TOE focused studies postulated that slack sources for technology's adoption were financial (Franquesa and Brandyberry 2009), knowledge (Jeyaraj et al 2006;Sabherwal et al 2006;Lin 2013;Wang et al 2013), and employee or human capital (Wang et al 2013;Vanacker et al 2013). In conclusion, such resources have a positive effect on a firm's flexibility and innovation in a dynamic environment, (Damanpour 1996;Judge et al 2001) Although there are still debatable results about the effect of technology's adoption on firms' performance; most literature shows that the use of new technology during production increases a fir m's productivity (Abramovitz 1956;Solow 1957;Saloner and Shepard 1995).…”

“…It has 4 dimensions: Knowledge acquisition, assimilation, transformation and exploitation, with 12 items. Slack resources are represented by 3 variables: technology, knowledge, and human resources (Wang et al 2013) with 10 items. Regarding the context of this study, slack finance is neglected.…”

The interactions between different types of financial and human resource slacks on firm performance: Evidence from a developing country

“…Wang et al (2013) point out that FS available for R&D investment enables employees to anticipate reward, such as remuneration for performance and financial incentives for their human capital in order to offer of an attractive reward to become a commitment, the R&D activities devoted for knowledge creation have to be supported by firm financial budget. Compared with their counterparts, private-owned firms in China face more constraints in financial resources in the areas of market economies, performance, and competitive advantage (Peng & Heat, 1996).…”

“…Hence, it is worth to investigate the impact of FS and HR slack on firm performance in different types of ownerships. Wang et al (2013) point out that some scholars (Mishina et al, 2004;Voss et al, 2008) have differentiated types of slack recently. In prior studies, findings related to HR slack and FS were not conclusive.…”