Cost stickiness and managerial resilience within organizations: evidence from China

Purpose - The concept of cost stickiness has emerged as a crucial factor affecting organizational resilience. While prior literature has mainly focused on the short-term performance implications of cost stickiness, this study aims to investigate its influence on organizational resilience over the long term. Design/methodology/approach - Using data from Chinese A-share listed companies spanning from 2010 to 2019, we examine how cost stickiness impacts organizational resilience and explore the underlying mechanisms. This study contributes to the theoretical understanding of cost stickiness and organizational resilience and offers practical insights for businesses aiming to strengthen their resilience amid economic uncertainties. Findings - Our findings suggest that cost stickiness not only promotes sustained performance growth and stabilizes financial outcomes but also enhances organizational resilience. Moreover, we find that macroeconomic policy uncertainty and micro-level corporate governance positively moderate the relationship between cost stickiness and organizational resilience. Additionally, our analysis reveals that organizational slack plays a partial mediating role in this relationship. Research limitations/implications - It is essential to clarify the concepts of cost and cost stickiness. Enterprises should scientifically implement the policy concept of “cutting overcapacity and reducing costs” while maintaining a reasonable cost stickiness. Practical implications - Shareholders and institutional investors of enterprises should pay close attention to the behavior of managers to reduce the possibility of “inferior” stickiness due to agency problems. Both external institutional investors and inner shareholders play essential roles in supervising managers. Social implications - Enterprises should focus on cultivating organizational resilience. Resilience is vital for an enterprise to adapt quickly to external changes, overcome adversity, and make progress. Enterprises should reduce the excessive emphasis on short-term performance, focus on long-term development, cultivate strategic thinking, and establish a corporate culture. Originality/value - The results show that cost stickiness can enhance organizational resilience. Economic policy uncertainty, the shareholding ratio of institutional investors, and the shareholding ratio of the largest shareholder can inhibit the opportunistic behavior of management, thereby positively regulating the relationship between cost stickiness and organizational resilience.