How Competitive Action Mediates the Resource Slack–Performance Relationship: A Meta‐Analytic Approach

• Author: Reha Karadag,David G. Sirmon,Christina Matz Carnes,Kai Xu
• Published date: 01 January 2019
• Date: 01 January 2019
• DOI: http://doi.org/10.1111/joms.12391

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

How Competitive Action Mediates the Resource Slack–

Performance Relationship: A Meta-Analytic Approach

Christina Matz Carnes,a Kai Xu,b David G. Sirmonc and

Reha Karadaga

aUniversity of Nebraska-Lincoln; bThe University of Texas at San Antonio; cUniversity of

Washing ton

abstract T he fungibility of organi zational slack provides fir ms significant l atitude in

addressing bot h internal and market pressures. A vast l iterature suggests that slack i nfluences

firm p erformance; however, the empirica l record is mixed, and the underlying mecha nism

linki ng slack to performance remains a mbiguous. We address these issues by theoretical ly

expanding t he slack–performance model to include mediat ion. Specifically, we develop and

test a model in which a f irm’s competitive behaviours d irect the utilization of slac k toward the

realizat ion of firm per formance. Our meta-a nalytic-based struct ural equation model supports

partia l mediation, showi ng that competitive behaviours provide some resolution to the

confl icted understanding of how slack af fects performance. Further, we provide value to the

slack literatu re by consolidating the evidence for the effect s of various types and forms of

organizat ional slack. Be yond providing robustnes s to our theoretical model , doing so offers a

more complete understanding of how operat ionalizations of slack and perfor mance outcomes

matter.

Keywo rds: competitive behav iour, meta-analyt ic mediation, performance, slack

INTRODUCTION

Resource slack represents a firm’s stock of flexible and largely undifferenti-

ated resources that can be quickly deployed (relative to committed resources)

to support a variety of actions in the pursuit of organizational goals (Sharfman

et al., 1988), including adaptation to internal or external pressures (Bourgeois,

1981; Singh, 1986). Slack promotes effective adaptation and change; however, its

presence is not without concern. Indeed, some argue that increased slack is a

Journal of Man agement Studi es 56:1 January 2 019

doi: 10. 1111/jom s.1 2391

Address for reprints: Christina M atz Carne s, College of Busines s, University of Nebra ska-Lincoln,

Lincoln, NE 6858 8-0491 (ccarnes@unl.edu).

58 C. M. Carnes et al.

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

liability because it decreases f irm eff iciency (George, 2005; Jensen, 1986; Love

and Nohria, 2005). The large array of empirical findings within t his literature

clearly reflects the complicated nature of slack. Con flicting results abound across

numerous outcomes – including, most prominently, firm performance – and the

collection of measures reflecting different conceptualizations of slack is quite

broad (Bourgeois, 1981; Singh, 1986).

Prior meta-analyses have sought to provide insight into the relationships be-

tween slack and different outcomes. Nearly three decades ago, Damanpour’s

(1991) meta-analysis examined slack as an antecedent to innovation, while 15

years ago, Daniel et al. (2004) meta-analysed the slack–performance relation-

ship. Both studies generally found positive relationships; however, subsequent

research continues to produce mixed results (e.g., Haleblian et al., 2012; Kim et

al., 2008; Lecuona and Reitzig, 2014; McClelland et al., 2010; Tang et al., 2015;

Tyler and Caner, 2016). Indeed, Daniel et al. foreshowed the ongoing production

of conflicting findings, stating one key focus of this line of research ‘should be to

directly examine how firms translate slack into higher performance’ (Daniel et

al., 2004, p. 572). Specifically, the mechanisms that systematically transform and

utilize slack for competitive purposes are conspicuously absent in the extant slack

literature (Tsang, 2006). Without a clear specification of slack’s utilization, our

understanding of how and when slack affects performance will remain conflicted

and limited.

In this paper, we reduce the ambiguity in the slack–performance relationship

by introducing a theory-based mediator. Specifically, research in the competi-

tive dynamics literature argues that slack resources influence a firm’s tendency

and ability to engage in competitive behaviour (Ferrier, 2001; Smith et al., 1991;

Stambaugh et al., 2011) and thus provides a basis to understand how the utiliza-

tion of slack can affect firm performance (Chen, 1996; Ndofor et al., 2011). This

literature promotes competitive aggressiveness and competitive complexity as two

major dimensions of competitive behaviours. We argue that these two dimensions

are mediating mechanisms that transform slack into performance outcomes. This

extended model not only begins to reconcile the conflicting prior empirical re-

sults but also advances our understanding of how slack affects performance. This

mediated model has the added benefit of contributing to the competitive dy-

namics literature by consolidating evidence regarding the effects of competitive

aggressiveness and complexity on performance.

Next, beyond detailing how competitive behaviour mediates the slack–perfor-

mance relationship, we address empirical complexities and nuances that have

proliferated in the slack literature. While the variety of types and forms of slack

developed in the literature adds breadth to the concept, it has also obfuscated the

consistency across studies. Thus, after we develop theory for our mediated model,

we empirically explore how various conceptualizations and operationalizations of

slack differentially impact our model, as well as their overall effects in the extant

literature. Presenting and discussing the nuances of these results provides new

insights that can help direct future work.

How Competitive Action Mediates Resource Slack-Performance 59

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

To achieve our research objectives, we rely on meta-analytic techniques, an ap-

proach that statistically aggregates empirical findings from multiple studies in

order to ascertain the overall direction and magnitude of a relationship (Hunter

and Schmidt, 2004). First, we use meta-analysis-based structural equation mod-

elling (Viswesvaran and Ones, 1995) to study the mediated model. Second, we

utilize meta-analysis to probe how various specifications in the slack literature,

such as the type and form of slack, performance operationalization, and the time

horizons considered, have influenced the empirical record.

THEORY AND HY POTHESES

Slack reflects the firm’s stock of resources available for easy redeployment (rel-

ative to committed resources) to meet organizational goals (Sharfman et al.,

1988). It represents a cushion enabling adaptation to internal or external de-

mands (Bourgeois, 1981; Singh, 1986). While a fairly straightforwa rd concept,

slack nonetheless has been conceptualized in a variety of ways. For instance, slack

has been conceived in various forms, including human, financial, and opera-

tional. Additionally, the literature is replete with alternative t ypes of slack based

on ‘ease of recovery’. For example, Bourgeois and Singh (1983) classify slack into

three types: available slack (representing the most liquid and pliable type), re-

coverable slack (capturing the excess organizational resources within t he firm,

such as overhead expenditures that can be found with additional effort), and po-

tential slack (capturing the firm’s existing financial leverage, such as debt-to-eq-

uity ratio, which might enable or limit future borrowing capacity). Other authors

offer variants of these t ypes, including absorbed/unabsorbed (Singh, 1986), high

discretion/low discretion (Chiu and Liaw, 2009; Sharfman et al., 1988), and im-

mediate or deferred accessibility (Finkelstein and Hambrick, 1990). Despite the

proliferation in the conceptualization of types of slack, the logic underpinning

the effect of slack on performance has remained relatively consistent – that is,

positive. And indeed, prior meta-analyses suggest that a positive relationship ex-

ists, on average (Daniel et al., 2004). In light of this stability in logic and prior

meta-analy tic evidence, we briefly rev iew why slack positively affects performance.

The overarching argument in the slack literature is that slack enables timely

responses to internal or external pressures and uncertainties. For example, slack

has been found to encourage risk-taking during organizational decline (Wiseman

and Bromiley, 1996), enable organizational change (Singh, 1986), and promote

experimenting with different opportunities (Iyer and Miller, 2008). Further, be-

yond enabling organizational change, slack also motivates managers to expand

in directions that exploit these underutilized resources (Penrose, 1959). Next,

slack provides a cushion that enables the firm to maintain operations under

environmental change (Cyert and March, 1963). Thus, overall, slack is argued

to allow firms to better adjust to external and internal pressures, and to enjoy

outcomes such as learning, R&D, innovation, and increased firm performance.