Abstract
Scholars have long been interested in understanding organizational slack. Peng et al. (2010) is a landmark study examining the effect of slack on firm performance. We seek to advance our understanding of the topic in three ways. First, we replicate the core findings of Peng et al. (2010) by drawing on a major and yet less investigated economy in Asia—Taiwan. Second, we differentiate the effect of slack by investigating both short- and long–term performance. Third, in addition to CEO duality, our study also examines the moderating effects of business groups and family firms as two widespread governance factors in Asia. Our results suggest that the effect of organizational slack on firm performance is contingent on the short– versus long–term perspective. Furthermore, we find that the slack–performance relationship is shaped by boundary conditions. Overall, our findings contribute to the literatures on organizational slack, corporate governance, and research in Asia.
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The authors would like to thank the Consulting Editor and reviewer for their constructive feedback, as well as California State University Fullerton (Project number: 0356621) and Taiwan’s Ministry of Science and Technology (MOST 107-2410-H-259-054-MY2) for financial support.
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Appendix
Appendix
Recent Research on Organizational Slack (2010–2021)
Authors | Year | Journal | Context | Major Findings |
|---|---|---|---|---|
Ahsan et al. | 2020 | MOR | EE | Financial slack does not affect firm internationalization. |
Arrfelt et al. | 2013 | AMJ | DE | Slack moderates the relationship between firm performance aspiration and investment. |
Bentley and Kehoe | 2020 | AMJ | DE | Human resource slack is more positively related to performance in firms embracing strategic change, and this relationship is strengthened by financial slack. |
Bradley et al. | 2011 | JBV | DE | Resource slack can stimulate growth but hamper the entrepreneurial tendency. |
Bradley et al. | 2011 | JMS | DE | While slack improves ventures’ adaptation, this effect holds only in a low discretion environment. |
Breton-Miller and Miller | 2015 | ETP | NA | Family firms would be more committed to building and maintaining slack resources than non-family firms. |
Buckley et al. | 2018 | JIBS | EE | Organizational slack reduces firms’ tendencies to invest in risky foreign markets. |
Cabral et al. | 2021 | SEJ | DE | Financial slack amplifies the positive effect of antitakeover protection on firms’ corporate venture capital programs. |
Chakrabarti | 2015 | SMJ | EE | Financial slack can ameliorate the effect of economic shock on growth configuration and firm performance. |
Chen et al. | 2012 | RP | EE | Slack weakens the S-shaped relationship between R&D internationalization and innovation performance. |
Chiu and Sharfman | 2011 | JOM | DE | Organizational slack enhances corporate social performance. |
Christina et al. | 2019 | JMS | NA | The relationship between slack and performance is mediated by firm competitive actions. |
Duque-Grisales and Aguilera-Caracuel | 2021 | JBE | EE | Financial slack weakens the relationship between environmental, social, and governance engagement and firm performance. |
Fang et al. | 2018 | MOR | EE | CEOs tend to preserve more slack during their final years in office. |
Gentry et al. | 2016 | ETP | DE | Relative to non-family firms, family firms demonstrate a higher tendency to preserve slack resources. |
Harrison and Coombs | 2012 | JBE | DE | Slack improves a firm’s community-based performance. |
Huang et al. | 2018 | JIBS | EE | Firms with more slack are more resilient to climate risk. |
Julian and Ofori-dankwa | 2013 | SMJ | EE | Financial slack can decrease CSR expenditures in certain institutional contexts. |
Kavusan and Frankort | 2019 | SMJ | DE | Holding more slack enables firms to ally with more novel partners. |
Kim and Bettis | 2014 | SMJ | DE | Organizational slack has a quadratic functional relationship with firm market value. |
Kim et al. | 2021 | HRM | EE | Slack strengthens the effect of high-powered work systems on firm performance. |
Kiss et al. | 2018 | ETP | DE | Financial slack has an inverted U-shaped relationship with SME export intensity. |
Kreiser et al. | 2020 | ETP | DE | Slack alleviates the adverse effect of environmental hostility on firm entrepreneurial orientation. |
Kuusela et al. | 2017 | SMJ | DE | Financial slack dampens the relationship between firm performance shortfall, and acquisition as well as divestment rates. |
Lecuona and Reitzig | 2014 | SMJ | EE | Although human resource slack impedes firm performance, holding excess numbers of employees with tacit knowledge can confer a competitive advantage. |
Leyva-de la Hiz et al. | 2019 | JBE | EE | Slack weakens the positive relationship between focused environmental innovation and firm performance. |
Liu et al. | 2017 | APJM | EE | Organizational slack moderates the relationship between family ownership and firm innovation. |
Liu et al. | 2014 | APJM | EE | Unabsorbed slack has a stronger impact than absorbed slack on product innovation. The effect of unabsorbed slack is strengthened by entrepreneurial orientation. |
Liu et al. | 2011 | MOR | EE | Slack dampens the negative relationship between family control and firm internationalization. |
Lu and Wong | 2019 | APJM | EE | Slack can encourage firms to demonstrate more exploratory innovation. |
Lungeanu et al. | 2016 | SMJ | DE | Slack allows firms to better address the challenge of poor innovative performance. |
Martin et al. | 2016 | SMJ | DE | Slack induces firms to emphasize the long–term in their decision-making. |
Massis et al. | 2018 | ETP | DE | Economic versus non-economic goals by family owners change the relationship between financial slack and firm profitability. |
McClelland et al. | 2010 | JOM | DE | Slack reduces a CEO’s commitment to the status quo. |
Mellahi and Wilkinson | 2010 | JMS | DE | Reducing slack has an inverse U-shaped relationship with firm innovation. |
Mousa and Reed | 2013 | ETP | DE | Organizational slack can improve IPO outcomes. |
Natividad | 2013 | OS | DE | Financial slack facilitates firm new product introduction. |
Paeleman and Vanacker | 2015 | JMS | DE | Conditions that combine slack in financial resources and constraints in human resources can improve firm performance. |
Panwar et al. | 2017 | JBE | DE | Slack resources allow small firms to become more socially engaged. |
Peillex and Ureche-rangau | 2016 | JBE | DE | Organizational slack increases firm propensity to propose a socially responsible fund. |
Peng et al. | 2010 | APJM | EE | Slack enhances firm performance; the slack–performance association is contingent on CEO duality and state- versus private–owned enterprises. |
Salge | 2012 | RP | DE | Slack enables firms to engage more in innovative searches. |
Sgourev and van Lent | 2017 | HR | DE | Although human resource slack improves firm operational reliability, it hampers efficiency. |
Shi et al. | 2018 | AMJ | DE | Slack mitigates the relationship between short–term interest and firm growth actions. |
Shu et al. | 2020 | APJM | EE | Organizational slack facilitates a firm’s green management. |
Stan et al. | 2014 | APJM | NA | Slack can confer different levels of advantages to private- versus state–owned enterprises. |
Sui and Baum | 2014 | JIBS | DE | Slack improves survival rates in the export market, especially for born-global firms. |
Tang et al. | 2015 | SMJ | DE | Slack magnifies the relationship between CEO hubris and firm CSR. |
Tyler and Caner | 2016 | SMJ | DE | Slack intensifies the association between below aspiration performance and new product introduction. |
Vanacker et al. | 2013 | JMS | DE | Venture capitalists and angel investors moderate the relationship between slack and firm performance. |
Vanacker et al. | 2017 | SMJ | DE | Slack increases firm performance at diminishing rates, but human resource slack decreases firm performance at diminishing rates. |
Verbeke and Yuan | 2013 | JMS | DE | HR slack increases subsidiary entrepreneurship when the environment is more dynamic. |
Wang et al. | 2016 | JOM | DE | Although financial slack facilitates rent generation of firm-specific knowledge resources, human resource slack hinders it. |
Xu and Hitt | 2020 | APJM | EE | Slack eases the firm internationalization process. |
Xu et al. | 2015 | APJM | EE | Unabsorbed slack is positively related to firm social performance; this relationship is contingent on state ownership. |
Yanadori and Cui | 2013 | SMJ | DE | Slack alleviates the negative association between pay dispersion and innovation. |
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Weng, D.H., Yang, KP. How does organizational slack influence firm performance? A replication and extension of Peng, Li, Xie, and Su (2010). Asia Pac J Manag 41, 377–406 (2024). https://doi.org/10.1007/s10490-022-09842-9
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DOI: https://doi.org/10.1007/s10490-022-09842-9