Slack resources

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					Slack resources

 What is slack resources?

 So what?

 How to use?

 Excess resources are important determinants of organizational
  structure, growth, and performance.( Penrose,1959)

 The difference between total resources and total necessary
  payments.( Cyert and March,1963)

 Bourgeois(1981) added that slack is a resource cushion that
  firms can use in a discretionary manner, both to counter threats
  and exploit opportunities.

 Bourgeois(1981), slack is conceived here as being composed of
  three interrelated but conceptually distinct dimensions: available,
  recoverable and potential slacks.
 Available slack consists of resources that are not yet assimilated
  into the technical design of the organization, e.g., excess liquidity.
  unabsorbed slack. (Singh.1986)

 Recoverable slack consists of resources that have already been
  absorbed into the system design as excess costs, e.g., excess
  overhead costs, but many be recovered during adverse times.
  absorbed slack. (Singh.1986)

 Potential slack consists of the capacity of the organization to
   generate extra resources from the environment, as by raising
   additional debt or equity capital.

 Questionaries:
    (A) assume that due to some sudden development, 10% of the
    time of all people working in your department has to be spent on
    work totally unconnected with the tasks and responsibilities of
    your department. How seriously will your output be affected over
    the next year?

 (B) Assume that due to a similar development your department’s
    annual operating budget is reduced by 10%. How significantly
    will your work be affected over the next year?
    Nohria,N. (1996), AMJ

 Financial measurement:

 Available slack– cash flow/net sales, current ratio, quick ratio.

   Recoverable slack– overhead/net sales, inventory/net sales

 Potential slack—long term debt/net worth, price/earnings ratio
Theoretical based

 Behavioral RBV based– slack resources play a crucial role in
  allowing organizations to innovate by permitting them to
  experiment with new strategies and innovative project that might
  not be approved in a more resource-constrained environment
  (Cyert & March 1963), and it can eliminate conflict among TMT.

 Agency theory-- slack diminishes incentives to innovate and
  promotes undisciplined investment in R&D activities that rarely
  yield economic benefits, it encourages the pursuit of pet projects
  by agents who show little regard for the interests of the
  principals they serve.

  --Paradox --- more or less is better?
How to use?

 Performance– positive, negative, and adverse U-shape, meta-

 Innovation—Exploration and exploitation, new product

 Risking taking--Pricing strategy, environmental treat, adaptation

 Bankrupt research
Thanks for your attention!

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