IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v145y2022icp360-376.html
   My bibliography  Save this article

In times of plenty: Slack resources, R&D investment, and entrepreneurial firms in challenging institutional environments

Author

Listed:
  • Du, Yunzhou
  • Kim, Phillip H.
  • Fourné, Sebastian P.L.
  • Wang, Xiaowei

Abstract

We address the puzzle of why in times of plenty, entrepreneurial firms do not uniformly invest their slack resources in R&D to sustain growth and competitiveness over time. We argue that understanding the slack-R&D investment relationship is incomplete without accounting for different types of slack, their trajectories (accumulation trendlines and change over time), and the institutional instability of firms’ operating contexts. Depending on internal and external uncertainties, slack can buffer defensively against these threats or be deployed proactively to support R&D. We test our hypotheses in the world’s largest emerging market by using a sample of 106 Chinese entrepreneurial firms operating from 2010 to 2015. By developing new theoretical perspectives regarding the dynamic nature of slack trajectories and institutional contexts in which slack-based investments are made, our results help reconcile mixed findings reported in prior research and illustrate the challenges firms confront when they commit slack to long-term, risky R&D investments.

Suggested Citation

  • Du, Yunzhou & Kim, Phillip H. & Fourné, Sebastian P.L. & Wang, Xiaowei, 2022. "In times of plenty: Slack resources, R&D investment, and entrepreneurial firms in challenging institutional environments," Journal of Business Research, Elsevier, vol. 145(C), pages 360-376.
    • Handle: RePEc:eee:jbrese:v:145:y:2022:i:c:p:360-376
    DOI: 10.1016/j.jbusres.2022.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296322002326
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2022.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Malen, Joel & Vaaler, Paul M., 2017. "Organizational slack, national institutions and innovation effort around the world," Journal of World Business, Elsevier, vol. 52(6), pages 782-797.
    2. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    3. Du, Yunzhou & Kim, Phillip H., 2021. "One size does not fit all: Strategy configurations, complex environments, and new venture performance in emerging economies," Journal of Business Research, Elsevier, vol. 124(C), pages 272-285.
    4. Hicheon Kim & Heechun Kim & Peggy M. Lee, 2008. "Ownership Structure and the Relationship Between Financial Slack and R&D Investments: Evidence from Korean Firms," Organization Science, INFORMS, vol. 19(3), pages 404-418, June.
    5. Daniel, Francis & Lohrke, Franz T. & Fornaciari, Charles J. & Turner, R. Jr., 2004. "Slack resources and firm performance: a meta-analysis," Journal of Business Research, Elsevier, vol. 57(6), pages 565-574, June.
    6. Phillip H. Kim & Karl Wennberg & Grégoire Croidieu, 2016. "Untapped Riches of Meso-Level Applications in Multilevel Entrepreneurship Mechanisms," Post-Print hal-02312380, HAL.
    7. Fang, Junxiong & He, Lerong & Conyon, Martin J., 2018. "The CEO Horizon Problem and Managerial Slack in China," Management and Organization Review, Cambridge University Press, vol. 14(2), pages 343-376, June.
    8. Phillip H. Kim & Karl Wennberg & Grégoire Croidieu, 2016. "Untapped Riches of Meso-Level Applications in Multilevel Entrepreneurship Mechanisms," Post-Print hal-02276717, HAL.
    9. Bradley, Steven W. & Wiklund, Johan & Shepherd, Dean A., 2011. "Swinging a double-edged sword: The effect of slack on entrepreneurial management and growth," Journal of Business Venturing, Elsevier, vol. 26(5), pages 537-554, September.
    10. Yuri Mishina & Timothy G. Pollock & Joseph F. Porac, 2004. "Are more resources always better for growth? Resource stickiness in market and product expansion," Strategic Management Journal, Wiley Blackwell, vol. 25(12), pages 1179-1197, December.
    11. Teirlinck, Peter, 2017. "Configurations of strategic R&D decisions and financial performance in small-sized and medium-sized firms," Journal of Business Research, Elsevier, vol. 74(C), pages 55-65.
    12. Erik Stam & Karl Wennberg, 2009. "The roles of R&D in new firm growth," Small Business Economics, Springer, vol. 33(1), pages 77-89, June.
    13. Berggren, Niclas & Bergh, Andreas & Bjã˜Rnskov, Christian, 2012. "The growth effects of institutional instability," Journal of Institutional Economics, Cambridge University Press, vol. 8(2), pages 187-224, June.
    14. Beverly B. Tyler & Turanay Caner, 2016. "New product introductions below aspirations, slack and R&D alliances: A behavioral perspective," Strategic Management Journal, Wiley Blackwell, vol. 37(5), pages 896-910, May.
    15. Boso, Nathaniel & Danso, Albert & Leonidou, Constantinos & Uddin, Moshfique & Adeola, Ogechi & Hultman, Magnus, 2017. "Does financial resource slack drive sustainability expenditure in developing economy small and medium-sized enterprises?," Journal of Business Research, Elsevier, vol. 80(C), pages 247-256.
    16. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    17. Mike W. Peng & Sunny Li Sun & Lívia Markóczy, 2015. "Human Capital and CEO Compensation during Institutional Transitions," Journal of Management Studies, Wiley Blackwell, vol. 52(1), pages 117-147, January.
    18. Heng Liu & Xiu-hao Ding & Hai Guo & Jin-hui Luo, 2014. "How does slack affect product innovation in high-tech Chinese firms: The contingent value of entrepreneurial orientation," Asia Pacific Journal of Management, Springer, vol. 31(1), pages 47-68, March.
    19. Lee, Sanghoon, 2015. "Slack and innovation: Investigating the relationship in Korea," Journal of Business Research, Elsevier, vol. 68(9), pages 1895-1905.
    20. Tom Vanacker & Veroniek Collewaert & Shaker A. Zahra, 2017. "Slack resources, firm performance, and the institutional context: Evidence from privately held European firms," Strategic Management Journal, Wiley Blackwell, vol. 38(6), pages 1305-1326, June.
    21. Matthew S. Kraatz & Edward J. Zajac, 2001. "How Organizational Resources Affect Strategic Change and Performance in Turbulent Environments: Theory and Evidence," Organization Science, INFORMS, vol. 12(5), pages 632-657, October.
    22. Jake G. Messersmith & Jeong-Yeon Lee & James P. Guthrie & Yong-Yeon Ji, 2014. "Turnover at the Top: Executive Team Departures and Firm Performance," Organization Science, INFORMS, vol. 25(3), pages 776-793, June.
    23. Chen, Chung-Jen & Huang, Yi-Fen, 2010. "Creative workforce density, organizational slack, and innovation performance," Journal of Business Research, Elsevier, vol. 63(4), pages 411-417, April.
    24. Teirlinck, Peter, 2020. "Engaging in new and more research-oriented R&D projects: Interplay between level of new slack, business strategy and slack absorption," Journal of Business Research, Elsevier, vol. 120(C), pages 181-194.
    25. Wei‐Ru Chen & Kent D. Miller, 2007. "Situational and institutional determinants of firms' R&D search intensity," Strategic Management Journal, Wiley Blackwell, vol. 28(4), pages 369-381, April.
    26. Covin, Jeffrey G. & Slevin, Dennis P., 1990. "New venture strategic posture, structure, and performance: An industry life cycle analysis," Journal of Business Venturing, Elsevier, vol. 5(2), pages 123-135, March.
    27. Justin Tan & Mike W. Peng, 2003. "Organizational slack and firm performance during economic transitions: two studies from an emerging economy," Strategic Management Journal, Wiley Blackwell, vol. 24(13), pages 1249-1263, December.
    28. Fredrich, Viktor & Bouncken, Ricarda B. & Kraus, Sascha, 2019. "The race is on: Configurations of absorptive capacity, interdependence and slack resources for interorganizational learning in coopetition alliances," Journal of Business Research, Elsevier, vol. 101(C), pages 862-868.
    29. Wu, Jianfeng & Tu, Rungting, 2007. "CEO stock option pay and R&D spending: a behavioral agency explanation," Journal of Business Research, Elsevier, vol. 60(5), pages 482-492, May.
    30. Alessandri, Todd M. & Pattit, Jason M., 2014. "Drivers of R&D investment: The interaction of behavioral theory and managerial incentives," Journal of Business Research, Elsevier, vol. 67(2), pages 151-158.
    31. Christina Matz Carnes & Kai Xu & David G. Sirmon & Reha Karadag, 2019. "How Competitive Action Mediates the Resource Slack–Performance Relationship: A Meta‐Analytic Approach," Journal of Management Studies, Wiley Blackwell, vol. 56(1), pages 57-90, January.
    32. Jiang, Yi & Peng, Mike W. & Yang, Xiaohua & Mutlu, Canan C., 2015. "Privatization, governance, and survival: MNE investments in private participation projects in emerging economies," Journal of World Business, Elsevier, vol. 50(2), pages 294-301.
    33. Du, Yunzhou & Kim, Phillip H. & Aldrich, Howard E., 2016. "Hybrid Strategies, Dysfunctional Competition, and New Venture Performance in Transition Economies," Management and Organization Review, Cambridge University Press, vol. 12(3), pages 469-501, September.
    34. Shahzad, Ali M. & Mousa, Fariss T. & Sharfman, Mark P., 2016. "The implications of slack heterogeneity for the slack-resources and corporate social performance relationship," Journal of Business Research, Elsevier, vol. 69(12), pages 5964-5971.
    35. Fourné, Sebastian P.L. & Rosenbusch, Nina & Heyden, Mariano L.M. & Jansen, Justin J.P., 2019. "Structural and contextual approaches to ambidexterity: A meta-analysis of organizational and environmental contingencies," European Management Journal, Elsevier, vol. 37(5), pages 564-576.
    36. Vincent L. Barker & Mark A. Mone, 1994. "Retrenchment: Cause of turnaround or consequence of decline?," Strategic Management Journal, Wiley Blackwell, vol. 15(5), pages 395-405, June.
    37. Kohtamäki, Marko & Heimonen, Jesse & Parida, Vinit, 2019. "The nonlinear relationship between entrepreneurial orientation and sales growth: The moderating effects of slack resources and absorptive capacity," Journal of Business Research, Elsevier, vol. 100(C), pages 100-110.
    38. Wei-Ru Chen, 2008. "Determinants of Firms' Backward- and Forward-Looking R&D Search Behavior," Organization Science, INFORMS, vol. 19(4), pages 609-622, August.
    39. Yanmei Zhu & Xinhua Wittmann & Mike Peng, 2012. "Institution-based barriers to innovation in SMEs in China," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1131-1142, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Yang & Jiang, Yan, 2023. "Does suppliers’ slack influence the relationship between buyers’ environmental orientation and green innovation?," Journal of Business Research, Elsevier, vol. 157(C).
    2. Li, Junbao & Shi, Zhanzhong & He, Chengying & Lv, Chengshuang, 2023. "Peer effects on corporate R&D investment policies: A spatial panel model approach," Journal of Business Research, Elsevier, vol. 158(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guo, Feng & Zou, Bo & Zhang, Xiaofei & Bo, Qingwen & Li, Kai, 2020. "Financial slack and firm performance of SMMEs in China: Moderating effects of government subsidies and market-supporting institutions," International Journal of Production Economics, Elsevier, vol. 223(C).
    2. Choi, Jaeho & Rhee, Mooweon & Kim, Young-Choon, 2019. "Performance feedback and problemistic search: The moderating effects of managerial and board outsiderness," Journal of Business Research, Elsevier, vol. 102(C), pages 21-33.
    3. Teirlinck, Peter, 2020. "Engaging in new and more research-oriented R&D projects: Interplay between level of new slack, business strategy and slack absorption," Journal of Business Research, Elsevier, vol. 120(C), pages 181-194.
    4. Tabesh, Pooya & Vera, Dusya & Keller, Robert T., 2019. "Unabsorbed slack resource deployment and exploratory and exploitative innovation: How much does CEO expertise matter?," Journal of Business Research, Elsevier, vol. 94(C), pages 65-80.
    5. Sulu Zhu & Pengqun Gao & Zhen Tang & Ming Tian, 2022. "The Research Venation Analysis and Future Prospects of Organizational Slack," Sustainability, MDPI, vol. 14(19), pages 1-23, October.
    6. Godoy-Bejarano, Jesús M. & Ruiz-Pava, Guillermo A. & Téllez-Falla, Diego F., 2020. "Environmental complexity, slack, and firm performance," Journal of Economics and Business, Elsevier, vol. 112(C).
    7. Altaf, Nufazil & Shah, Farooq, 2017. "Slack heterogeneity and firm performance: Investigating the relationship in Indian context," Research in International Business and Finance, Elsevier, vol. 42(C), pages 390-403.
    8. Ciprian Stan & Mike Peng & Garry Bruton, 2014. "Slack and the performance of state-owned enterprises," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 473-495, June.
    9. Pinar Sener Tournus & Fatma Didin‐Sonmez & Elif Akben‐Selcuk, 2023. "How does the economic policy uncertainty affect the relationship between financial slack and firm performance in emerging countries?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 171-186, January.
    10. Huang, Yi-Chun & Chen, Chih Ta, 2022. "Exploring institutional pressures, firm green slack, green product innovation and green new product success: Evidence from Taiwan's high-tech industries," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    11. Symeou, Pavlos C. & Zyglidopoulos, Stelios & Gardberg, Naomi A., 2019. "Corporate environmental performance: Revisiting the role of organizational slack," Journal of Business Research, Elsevier, vol. 96(C), pages 169-182.
    12. Paeleman, Ine & Fuss, Catherine & Vanacker, Tom, 2017. "Untangling the multiple effects of slack resources on firms’ exporting behavior," Journal of World Business, Elsevier, vol. 52(6), pages 769-781.
    13. María Agustí & Francisco Velasco & José L. Galán, 2021. "The dynamic slack‐performance relationship from an efficiency perspective," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 850-862, June.
    14. Mariadoss, Babu John & Johnson, Jean L. & Martin, Kelly D., 2014. "Strategic intent and performance: The role of resource allocation decisions," Journal of Business Research, Elsevier, vol. 67(11), pages 2393-2402.
    15. Shaikh, Ibrahim A. & O'Brien, Jonathan Paul & Peters, Lois, 2018. "Inside directors and the underinvestment of financial slack towards R&D-intensity in high-technology firms," Journal of Business Research, Elsevier, vol. 82(C), pages 192-201.
    16. Yun Song & Hongqu He & Caiyu Yan, 2022. "Impacts of top management team fault‐line on firm's innovation—Financial slack over‐investment and underinvestment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3348-3360, December.
    17. Jafari Sadeghi, Vahid & Biancone, Paolo Pietro, 2018. "How micro, small and medium-sized enterprises are driven outward the superior international trade performance? A multidimensional study on Italian food sector," Research in International Business and Finance, Elsevier, vol. 45(C), pages 597-606.
    18. Wiersma, Eelke, 2017. "How and when do firms translate slack into better performance?," The British Accounting Review, Elsevier, vol. 49(5), pages 445-459.
    19. Teirlinck, Peter, 2022. "Enhancing R&D employment slack during environmental turbulence: Triggers and firm performance consequences for R&D-active SMEs," Technovation, Elsevier, vol. 118(C).
    20. Samuel Adomako & Nguyen Phong Nguyen, 2020. "Human resource slack, sustainable innovation, and environmental performance of small and medium‐sized enterprises in sub‐Saharan Africa," Business Strategy and the Environment, Wiley Blackwell, vol. 29(8), pages 2984-2994, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:145:y:2022:i:c:p:360-376. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.