IDEAS home Printed from https://ideas.repec.org/a/eee/joecas/v10y2013i1p38-52.html
   My bibliography  Save this article

Matching slack resources and investment strategies to achieve long-term performance: New perspectives on corporate adaptability

Author

Listed:
  • Jalilvand, Abol
  • Kim, Sung Min

Abstract

Managers are continually challenged to balance the tradeoffs between adapting to rapidly changing market environments and focusing on existing core efficiencies. In this paper, we advance new perspectives on corporate adaptability by departing from the premise of the previous research that treats a firmʼs investment strategies and management of its slack resources in isolation. We contend that firms with adaptive capabilities attempt to match the type of slack resources (i.e., absorbed/specific or unabsorbed/flexible) with the nature of their investment strategies (i.e., exploration vs. efficiencies in existing assets). We further advance that the dynamics of strategy and performance relationship is moderated by the market turbulence level.

Suggested Citation

  • Jalilvand, Abol & Kim, Sung Min, 2013. "Matching slack resources and investment strategies to achieve long-term performance: New perspectives on corporate adaptability," The Journal of Economic Asymmetries, Elsevier, vol. 10(1), pages 38-52.
    • Handle: RePEc:eee:joecas:v:10:y:2013:i:1:p:38-52
    DOI: 10.1016/j.jeca.2013.10.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1703494913000078
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeca.2013.10.001?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. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. James G. March, 1991. "Exploration and Exploitation in Organizational Learning," Organization Science, INFORMS, vol. 2(1), pages 71-87, February.
    4. Soku Byoun, 2008. "How and When Do Firms Adjust Their Capital Structures toward Targets?," Journal of Finance, American Finance Association, vol. 63(6), pages 3069-3096, December.
    5. 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.
    6. Zi-Lin He & Poh-Kam Wong, 2004. "Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis," Organization Science, INFORMS, vol. 15(4), pages 481-494, August.
    7. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    8. Andrea Gamba & Alexander Triantis, 2008. "The Value of Financial Flexibility," Journal of Finance, American Finance Association, vol. 63(5), pages 2263-2296, October.
    9. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    10. Daniel A. Levinthal & James G. March, 1993. "The myopia of learning," Strategic Management Journal, Wiley Blackwell, vol. 14(S2), pages 95-112, December.
    11. Brown, James R. & Petersen, Bruce C., 2011. "Cash holdings and R&D smoothing," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 694-709, June.
    12. Martin Reeves & Knut Haanaes & Claire Love & Simon Levin, 2012. "Sustainability as Adaptability," Journal of Applied Corporate Finance, Morgan Stanley, vol. 24(2), pages 14-22, June.
    13. James R. Brown & Steven M. Fazzari & Bruce C. Petersen, 2009. "Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom," Journal of Finance, American Finance Association, vol. 64(1), pages 151-185, February.
    14. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    15. Constantine Andriopoulos & Marianne W. Lewis, 2009. "Exploitation-Exploration Tensions and Organizational Ambidexterity: Managing Paradoxes of Innovation," Organization Science, INFORMS, vol. 20(4), pages 696-717, August.
    16. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    17. 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.
    18. Vladimir A. Gatchev & Todd Pulvino & Vefa Tarhan, 2010. "The Interdependent and Intertemporal Nature of Financial Decisions: An Application to Cash Flow Sensitivities," Journal of Finance, American Finance Association, vol. 65(2), pages 725-763, April.
    19. Morris James R, 2009. "Life and Death of Businesses: A Review of Research on Firm Mortality," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(1), pages 1-41, October.
    20. William P. Wan & Daphne W. Yiu, 2009. "From crisis to opportunity: environmental jolt, corporate acquisitions, and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 30(7), pages 791-801, July.
    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. Harry DeAngelo & Linda DeAngelo, 2007. "Payout Policy Pedagogy: What Matters and Why," European Financial Management, European Financial Management Association, vol. 13(1), pages 11-27, January.
    23. Lins, Karl V. & Servaes, Henri & Tufano, Peter, 2010. "What drives corporate liquidity? An international survey of cash holdings and lines of credit," Journal of Financial Economics, Elsevier, vol. 98(1), pages 160-176, October.
    24. Qing Cao & Eric Gedajlovic & Hongping Zhang, 2009. "Unpacking Organizational Ambidexterity: Dimensions, Contingencies, and Synergistic Effects," Organization Science, INFORMS, vol. 20(4), pages 781-796, August.
    25. Jalilvand, Abolhassan & Harris, Robert S, 1984. "Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study," Journal of Finance, American Finance Association, vol. 39(1), pages 127-145, March.
    26. John R. Graham, 2003. "Taxes and Corporate Finance: A Review," The Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1075-1129.
    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. Muhammad Ramzan & Wee‐Yeap Lau, 2023. "Impact of asset preferences on firm performance over its life cycle: Is agency theory or neo‐classical theory more relevant?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 595-607, January.
    2. Voulgaris, Fotini & Lemonakis, Christos, 2014. "Competitiveness and profitability: The case of chemicals, pharmaceuticals and plastics," The Journal of Economic Asymmetries, Elsevier, vol. 11(C), pages 46-57.
    3. Van Thac Dang & Ninh Nguyen & Xiangzhi Bu & Jianming Wang, 2019. "The Relationship between Corporate Environmental Responsibility and Firm Performance: A Moderated Mediation Model of Strategic Similarity and Organization Slack," Sustainability, MDPI, vol. 11(12), pages 1-14, June.
    4. Susanne Hügel & Markus Kreutzer, 2019. "The Impact Of Organisational Slack On Innovative Work Behaviour: How Do Top Managers And Employees Differ?," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-44, April.

    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. Mai, Nhat Chi, 2012. "Market timing, taxes and capital structure: evidence from Vietnam," OSF Preprints t3mvs, Center for Open Science.
    2. Bontempi, Maria Elena & Bottazzi, Laura & Golinelli, Roberto, 2020. "A multilevel index of heterogeneous short-term and long-term debt dynamics," Journal of Corporate Finance, Elsevier, vol. 64(C).
    3. Jingoo Kang & Sang‐Joon Kim, 2020. "Performance implications of incremental transition and discontinuous jump between exploration and exploitation," Strategic Management Journal, Wiley Blackwell, vol. 41(6), pages 1083-1111, June.
    4. Brett W. Josephson & Jean L. Johnson & Babu John Mariadoss, 2016. "Strategic marketing ambidexterity: antecedents and financial consequences," Journal of the Academy of Marketing Science, Springer, vol. 44(4), pages 539-554, July.
    5. Sahi, Gurjeet Kaur & Gupta, Mahesh C. & Cheng, T.C.E., 2020. "The effects of strategic orientation on operational ambidexterity: A study of indian SMEs in the industry 4.0 era," International Journal of Production Economics, Elsevier, vol. 220(C).
    6. Özgür Arslan-Ayaydin & Chris Florackis & Aydin Ozkan, 2014. "Financial flexibility, corporate investment and performance: evidence from financial crises," Review of Quantitative Finance and Accounting, Springer, vol. 42(2), pages 211-250, February.
    7. Kim, Sang-Joon & Bae, John & Oh, Hannah, 2019. "Financing strategically: The moderation effect of marketing activities on the bifurcated relationship between debt level and firm valuation of small and medium enterprises," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 663-681.
    8. Biswajit Ghose & Kailash Chandra Kabra, 2020. "Does Growth Affect Firms’ Leverage Adjustment Speed? A Study of Indian Firms," Business Perspectives and Research, , vol. 8(2), pages 139-155, July.
    9. Feld, Lars P. & Heckemeyer, Jost H. & Overesch, Michael, 2013. "Capital structure choice and company taxation: A meta-study," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2850-2866.
    10. Michael Yao-Ping Peng & Ku-Ho Lin & Dennis Liute Peng & Peihua Chen, 2019. "Linking Organizational Ambidexterity and Performance: The Drivers of Sustainability in High-Tech Firms," Sustainability, MDPI, vol. 11(14), pages 1-17, July.
    11. Miguel Acedo-Ramírez & Juan Ayala-Calvo & José Rodríguez-Osés, 2013. "Capital structure of small companies in the Spanish footwear sector: relevant factors," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 155-173, June.
    12. Arnold, Marc, 2014. "Managerial cash use, default, and corporate financial policies," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 305-325.
    13. Douglas (DJ) Fairhurst, 2020. "Financing seasonal demand," Financial Management, Financial Management Association International, vol. 49(3), pages 839-870, September.
    14. Paulo, Alves, 2018. "Abnormal retained earnings around the world," Journal of Multinational Financial Management, Elsevier, vol. 46(C), pages 63-74.
    15. Biswajit Ghose, 2017. "Impact of Business Group Affiliation on Capital Structure Adjustment Speed: Evidence from Indian Manufacturing Sector," Emerging Economy Studies, International Management Institute, vol. 3(1), pages 54-67, May.
    16. Marco Botta & Luca Vittorio Angelo Colombo, 2022. "Non‐linear capital structure dynamics," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(9-10), pages 1897-1928, October.
    17. Goldbach, Stefan & Møen, Jarle & Schindler, Dirk & Schjelderup, Guttorm & Wamser, Georg, 2021. "The tax-efficient use of debt in multinational corporations," Journal of Corporate Finance, Elsevier, vol. 71(C).
    18. Bessler, Wolfgang & Drobetz, Wolfgang & Haller, Rebekka & Meier, Iwan, 2013. "The international zero-leverage phenomenon," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 196-221.
    19. Anton Miglo, 2012. "Managers versus Students: New Approach in Improving Capital Structure Education," Journal of Education and Vocational Research, AMH International, vol. 3(11), pages 353-369.
    20. Ralf Sabiwalsky, 2010. "Nonlinear modelling of target leverage with latent determinant variables — new evidence on the trade‐off theory," Review of Financial Economics, John Wiley & Sons, vol. 19(4), pages 137-150, October.

    More about this item

    Statistics

    Access and download statistics

    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:joecas:v:10:y:2013:i:1:p:38-52. 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: https://www.journals.elsevier.com/the-journal-of-economic-asymmetries/ .

    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.