IDEAS home Printed from https://ideas.repec.org/a/eee/worbus/v52y2017i6p782-797.html
   My bibliography  Save this article

Organizational slack, national institutions and innovation effort around the world

Author

Listed:
  • Malen, Joel
  • Vaaler, Paul M.

Abstract

We develop and test a cross-level theoretical framework assuming that countries differ in national corporate governance institutions (NCGIs) protecting firm shareholders and employees, and that such NCGI protections moderate the firm-level relationship between organizational slack and innovation effort, that is, the purposeful allocation of firm resources toward the development of new products and services (as distinct from the new products and services themselves). We find support for framework predictions in two-stage estimated dependent variable analyses of organizational slack and institutional protections of shareholders and employees at more than 7000 firms from 29 countries observed from 1991 to 2005. Stronger shareholder protections diminish while stronger employee protections magnify slack effects on innovation effort. Our findings contribute to IB research investigating how country-level governance institutions influence firm-level behavior and performance.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:worbus:v:52:y:2017:i:6:p:782-797
    DOI: 10.1016/j.jwb.2017.07.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1090951617305722
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jwb.2017.07.001?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. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    2. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1339-1382.
    3. Alexander Dyck & Luigi Zingales, 2004. "Private Benefits of Control: An International Comparison," Journal of Finance, American Finance Association, vol. 59(2), pages 537-600, April.
    4. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    5. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    6. 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.
    7. Lewis, Jeffrey B. & Linzer, Drew A., 2005. "Estimating Regression Models in Which the Dependent Variable Is Based on Estimates," Political Analysis, Cambridge University Press, vol. 13(4), pages 345-364.
    8. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
    9. Paul M. Vaaler & Gerry McNamara, 2010. "Are Technology-Intensive Industries More Dynamically Competitive? No and Yes," Organization Science, INFORMS, vol. 21(1), pages 271-289, February.
    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. Taylor, Mark Zachary, 2004. "Empirical Evidence Against Varieties of Capitalism's Theory of Technological Innovation," International Organization, Cambridge University Press, vol. 58(3), pages 601-631, July.
    12. Pitelis, Christos, 2009. "Edith Penrose’s ‘The Theory of the Growth of the Firm’ Fifty Years Later," MPRA Paper 23180, University Library of Munich, Germany.
    13. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
    14. Julian Atanassov & E. Han Kim, 2009. "Labor and Corporate Governance: International Evidence from Restructuring Decisions," Journal of Finance, American Finance Association, vol. 64(1), pages 341-374, February.
    15. 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.
    16. Laurence Capron & Mauro Guillén, 2009. "National corporate governance institutions and post‐acquisition target reorganization," Strategic Management Journal, Wiley Blackwell, vol. 30(8), pages 803-833, August.
    17. Jusko, Karen Long & Shively, W. Phillips, 2005. "Applying a Two-Step Strategy to the Analysis of Cross-National Public Opinion Data," Political Analysis, Cambridge University Press, vol. 13(4), pages 327-344.
    18. William Lazonick, 2007. "The US stock market and the governance of innovative enterprise ," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(6), pages 983-1035, December.
    19. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110-110.
    20. Tylecote, Andrew & Ramirez, Paulina, 2006. "Corporate governance and innovation: The UK compared with the US and 'insider' economies," Research Policy, Elsevier, vol. 35(1), pages 160-180, February.
    21. Christos N. Pitelis, 2007. "A Behavioral Resource-Based View of the Firm: The Synergy of Cyert and March (1963) and Penrose (1959)," Organization Science, INFORMS, vol. 18(3), pages 478-490, June.
    22. David Souder & Philip Bromiley, 2012. "Explaining temporal orientation: Evidence from the durability of firms' capital investments," Strategic Management Journal, Wiley Blackwell, vol. 33(5), pages 550-569, May.
    23. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    24. Aleksandra Kacperczyk, 2009. "With greater power comes greater responsibility? takeover protection and corporate attention to stakeholders," Strategic Management Journal, Wiley Blackwell, vol. 30(3), pages 261-285, March.
    25. James P. Guthrie & Deepak K. Datta, 2008. "Dumb and Dumber: The Impact of Downsizing on Firm Performance as Moderated by Industry Conditions," Organization Science, INFORMS, vol. 19(1), pages 108-123, February.
    26. Clare Wang, 2014. "Accounting Standards Harmonization and Financial Statement Comparability: Evidence from Transnational Information Transfer," Journal of Accounting Research, Wiley Blackwell, vol. 52(4), pages 955-992, September.
    27. Akkermans, Dirk & Castaldi, Carolina & Los, Bart, 2009. "Do 'liberal market economies' really innovate more radically than 'coordinated market economies'?: Hall and Soskice reconsidered," Research Policy, Elsevier, vol. 38(1), pages 181-191, February.
    28. Mary J. Benner, 2008. "Financial market reactions following technological discontinuities: a non-event study in two industries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(1), pages 109-154, February.
    29. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351-351.
    30. Varsakelis, Nikos C., 2001. "The impact of patent protection, economy openness and national culture on R&D investment: a cross-country empirical investigation," Research Policy, Elsevier, vol. 30(7), pages 1059-1068, August.
    31. Pino G. Audia & Henrich R. Greve, 2006. "Less Likely to Fail: Low Performance, Firm Size, and Factory Expansion in the Shipbuilding Industry," Management Science, INFORMS, vol. 52(1), pages 83-94, January.
    32. Pertti H. Lounamaa & James G. March, 1987. "Adaptive Coordination of a Learning Team," Management Science, INFORMS, vol. 33(1), pages 107-123, January.
    33. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    34. Koeniger, Winfried, 2005. "Dismissal costs and innovation," Economics Letters, Elsevier, vol. 88(1), pages 79-84, July.
    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. Sung, Bongsuk, 2019. "Do government subsidies promote firm-level innovation? Evidence from the Korean renewable energy technology industry," Energy Policy, Elsevier, vol. 132(C), pages 1333-1344.
    2. 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.
    3. Sasa Ding & Frank McDonald & Yingqi Wei, 2021. "Is Internationalization Beneficial to Innovation? Evidence from a Meta-analysis," Management International Review, Springer, vol. 61(4), pages 469-519, August.
    4. 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).
    5. Hameeda A. AlMalki & Christopher M. Durugbo, 2023. "Systematic review of institutional innovation literature: towards a multi-level management model," Management Review Quarterly, Springer, vol. 73(2), pages 731-785, June.
    6. Lindner, Thomas & Puck, Jonas & Doh, Jonathan, 2021. "Hierarchical modelling in international business research: Patterns, problems, and practical guidelines," Journal of World Business, Elsevier, vol. 56(4).
    7. Sung, Bongsuk & Soh, Jin Young & Park, Chun Gun, 2022. "Comparing government support, firm heterogeneity, and inter-firm spillovers for productivity enhancement: Evidence from the Korean solar energy technology industry," Energy, Elsevier, vol. 246(C).
    8. Eduardo Ortas & Isabel Gallego‐Álvarez & Igor Álvarez, 2019. "National institutions, stakeholder engagement, and firms' environmental, social, and governance performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(3), pages 598-611, May.
    9. Nuruzzaman, N. & Singh, Deeksha & Pattnaik, Chinmay, 2019. "Competing to be innovative: Foreign competition and imitative innovation of emerging economy firms," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    10. Boulton, Thomas J., 2023. "Property rights and access to equity capital in China," Global Finance Journal, Elsevier, vol. 55(C).
    11. Jun-You Lin & Chih-Hai Yang, 2020. "Heterogeneity in industry–university R&D collaboration and firm innovative performance," Scientometrics, Springer;Akadémiai Kiadó, vol. 124(1), pages 1-25, July.
    12. Alessandro Zattoni & Emmanouil Dedoulis & Stergios Leventis & Hans Van Ees, 2020. "Corporate governance and institutions—A review and research agenda," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 465-487, November.
    13. Vanacker, Tom & Zahra, Shaker A. & Holmes, R. Michael, 2021. "Corporate entrepreneurship, country institutions and firm financial performance," Journal of World Business, Elsevier, vol. 56(3).

    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. Malen, Joel, 2015. "Motivating And Enabling Firm Innovation Effort: Integrating Penrosian And Behavioral Theory Perspectives On Slack Resources," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 49(1), pages 37-54, October.
    2. Otten, J.A. & Heugens, P.P.M.A.R., 2007. "Extending the Managerial Power Theory of Executive Pay: A Cross National Test," ERIM Report Series Research in Management ERS-2007-090-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    3. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    4. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    5. Marc van Essen & J. (Hans) van Oosterhout & Pursey P. M. A. R. Heugens, 2013. "Competition and Cooperation in Corporate Governance: The Effects of Labor Institutions on Blockholder Effectiveness in 23 European Countries," Organization Science, INFORMS, vol. 24(2), pages 530-551, April.
    6. Alves, Paulo & Couto, Eduardo Barbosa & Francisco, Paulo Morais, 2016. "Executive pay and performance in Portuguese listed companies," Research in International Business and Finance, Elsevier, vol. 37(C), pages 184-195.
    7. Dennis Mueller, 2006. "Corporate Governance and Economic Performance," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(5), pages 623-643.
    8. D'Souza, Juliet & Nash, Robert, 2017. "Private benefits of public control: Evidence of political and economic benefits of state ownership," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 232-247.
    9. Singh, Ajit & Singh, Alaka & Weisse, Bruce, 2002. "Corporate Governance, Competetion, The new International Financial Architecture and Large Corporations in Emerging Markets," MPRA Paper 24305, University Library of Munich, Germany.
    10. Palash Deb & Parthiban David & Jonathan O'Brien, 2017. "When is cash good or bad for firm performance?," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 436-454, February.
    11. Buchen, Clemens, 2010. "Emerging economic systems in Central and Eastern Europe – a qualitative and quantitative assessment," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 37141, July.
    12. Johan E. Eklund, 2009. "Corporate Governance and Investments in Scandinavia – Ownership Concentration and Dual-Class Equity Structure," Chapters, in: Per-Olof Bjuggren & Dennis C. Mueller (ed.), The Modern Firm, Corporate Governance and Investment, chapter 7, Edward Elgar Publishing.
    13. Portolano, Alessandro, 2000. "The decision to adopt defensive tactics in Italy," International Review of Law and Economics, Elsevier, vol. 20(4), pages 425-452, December.
    14. Gur Aminadav & Elias Papaioannou, 2020. "Corporate Control around the World," Journal of Finance, American Finance Association, vol. 75(3), pages 1191-1246, June.
    15. Trojanowski, Grzegorz, 2008. "Equity block transfers in transition economies: Evidence from Poland," Economic Systems, Elsevier, vol. 32(3), pages 217-238, September.
    16. Isabel Gutierrez & Jordi Surroca, 2014. "Revisiting corporate governance through the lens of the Spanish evidence," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 989-1017, November.
    17. Rowoldt, Maximilian & Starke, Dennis, 2016. "The role of governments in hostile takeovers – Evidence from regulation, anti-takeover provisions and government interventions," International Review of Law and Economics, Elsevier, vol. 47(C), pages 1-15.
    18. Gupta, Deepika R. & Veliyath, Rajaram & George, Rejie, 2018. "Influence of national culture on IPO activity," Journal of Business Research, Elsevier, vol. 90(C), pages 226-246.
    19. Jo, Hoje & Song, Moon H. & Tsang, Albert, 2016. "Corporate social responsibility and stakeholder governance around the world," Global Finance Journal, Elsevier, vol. 29(C), pages 42-69.
    20. Claessens, Stijn & Yurtoglu, B. Burcin, 2013. "Corporate governance in emerging markets: A survey," Emerging Markets Review, Elsevier, vol. 15(C), pages 1-33.

    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:worbus:v:52:y:2017:i:6:p:782-797. 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/wps/find/journaldescription.cws_home/620401/description#description .

    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.