How and when do firms translate slack into better performance? |
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| Institution: | 1. University of the West of Scotland and University of Winchester, Accounting, Finance and Law, Business School, University of the West of Scotland, Ayr Campus, Ayr KA8 0SX, United Kingdom;2. Business School, University of Winchester, Winchester SO22 4NR, United Kingdom;1. School of Business and Law, Central Queensland University, 400 Kent Street, Sydney, NSW 2000, Australia;2. School of Accountancy, Queensland University of Technology, Gardens Point Campus, 2, George Street, Brisbane, Queensland 4000, Australia;3. Department of Accounting and Corporate Governance, Macquarie University, Balaclava Road, North Ryde, NSW 2109, Australia;1. Norwich Business School, University of East Anglia, NR4 7TJ, UK;2. Bangor Business School, Bangor University, LL57 2DG, UK;1. Durham University Business School, Durham University, Stockton on Tees TS17 6BH, Great Britain, United Kingdom;2. Newcastle University Business School, Newcastle Upon Tyne NE1 4SE, Great Britain, United Kingdom |
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| Abstract: | Many studies have tested the impact of organizational slack on performance, and yet little is known about how managers make use of slack, and in what circumstances it is most beneficial. We show that the managers of firms with higher levels of slack tend to overinvest, which will have a negative impact on performance, but at the same time they may innovate, which will subsequently have a positive impact. Our results also indicates slack is more beneficial when the firm has many profitable investment opportunities. We show that different types of slack influence performance differently, the total effect of available slack on performance being positive, whereas that of recoverable slack on performance being negative. |
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| Keywords: | Slack Overinvestment Innovation Performance |
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