What is slack resources?
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.
(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
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
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
Thanks for your attention!