IDEAS home Printed from https://ideas.repec.org/a/kap/asiapa/v41y2024i1d10.1007_s10490-022-09842-9.html
   My bibliography  Save this article

How does organizational slack influence firm performance? A replication and extension of Peng, Li, Xie, and Su (2010)

Author

Listed:
  • David H. Weng

    (California State University Fullerton)

  • Kuo-Pin Yang

    (National Dong Hwa University)

Abstract

Scholars have long been interested in understanding organizational slack. Peng et al. (2010) is a landmark study examining the effect of slack on firm performance. We seek to advance our understanding of the topic in three ways. First, we replicate the core findings of Peng et al. (2010) by drawing on a major and yet less investigated economy in Asia—Taiwan. Second, we differentiate the effect of slack by investigating both short- and long–term performance. Third, in addition to CEO duality, our study also examines the moderating effects of business groups and family firms as two widespread governance factors in Asia. Our results suggest that the effect of organizational slack on firm performance is contingent on the short– versus long–term perspective. Furthermore, we find that the slack–performance relationship is shaped by boundary conditions. Overall, our findings contribute to the literatures on organizational slack, corporate governance, and research in Asia.

Suggested Citation

  • David H. Weng & Kuo-Pin Yang, 2024. "How does organizational slack influence firm performance? A replication and extension of Peng, Li, Xie, and Su (2010)," Asia Pacific Journal of Management, Springer, vol. 41(1), pages 377-406, March.
    • Handle: RePEc:kap:asiapa:v:41:y:2024:i:1:d:10.1007_s10490-022-09842-9
    DOI: 10.1007/s10490-022-09842-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10490-022-09842-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10490-022-09842-9?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. Kulwant Singh & Ishtiaq P. Mahmood & Siddharth Natarajan, 2017. "Capital Market Development and Firm Restructuring During an Economic Shock," Organization Science, INFORMS, vol. 28(3), pages 552-573, June.
    2. Richard A. Bettis & Constance E. Helfat & J. Myles Shaver & Richard A. Bettis & Constance E. Helfat & J. Myles Shaver, 2016. "The necessity, logic, and forms of replication," Strategic Management Journal, Wiley Blackwell, vol. 37(11), pages 2193-2203, November.
    3. Tarun Khanna & Jan W. Rivkin, 2001. "Estimating the performance effects of business groups in emerging markets," Strategic Management Journal, Wiley Blackwell, vol. 22(1), pages 45-74, January.
    4. Steven W. Bradley & Dean A. Shepherd & Johan Wiklund, 2011. "The Importance of Slack for New Organizations Facing ‘Tough’ Environments," Journal of Management Studies, Wiley Blackwell, vol. 48, pages 1071-1097, July.
    5. Alvaro Cuervo-Cazurra & Ajai Gaur & Deeksha Singh, 2019. "Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 598-632, June.
    6. Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting out Tunneling: An Application to Indian Business Groups," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 121-148.
    7. Luis Alfonso Dau & Randall Morck & Bernard Yin Yeung, 2021. "Business groups and the study of international business: A Coasean synthesis and extension," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(2), pages 161-211, March.
    8. Kai Xu & Michael A. Hitt, 2020. "The international expansion of family firms: The moderating role of internal financial slack and external capital availability," Asia Pacific Journal of Management, Springer, vol. 37(1), pages 127-153, March.
    9. Wang, Heli & Chen, Wei-Ru, 2010. "Is firm-specific innovation associated with greater value appropriation? The roles of environmental dynamism and technological diversity," Research Policy, Elsevier, vol. 39(1), pages 141-154, February.
    10. Elango, B. & Dhandapani, Karthik, 2020. "Does institutional industry context matter to performance? An extension of the institution-based view," Journal of Business Research, Elsevier, vol. 115(C), pages 139-148.
    11. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    12. Kim, Kong-Hee & Al-Shammari, Hussam A. & Kim, Bongjin & Lee, Seung-Hyun, 2009. "CEO duality leadership and corporate diversification behavior," Journal of Business Research, Elsevier, vol. 62(11), pages 1173-1180, November.
    13. Jing Chen & Zhe Zhang & Ming Jia, 2021. "How CEO narcissism affects corporate social responsibility choice?," Asia Pacific Journal of Management, Springer, vol. 38(3), pages 897-924, September.
    14. 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.
    15. Jonathan Doh & Suzana Rodrigues & Ayse Saka-Helmhout & Mona Makhija, 2017. "International business responses to institutional voids," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(3), pages 293-307, April.
    16. 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.
    17. Su, Yiyi & Xu, Dean & Phan, Phillip H., 2008. "Principal—Principal Conflict in the Governance of the Chinese Public Corporation," Management and Organization Review, Cambridge University Press, vol. 4(1), pages 17-38, March.
    18. Aya S Chacar & William Newburry & Balagopal Vissa, 2010. "Bringing institutions into performance persistence research: Exploring the impact of product, financial, and labor market institutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(7), pages 1119-1140, September.
    19. Michael L. McDonald & James D. Westphal & Melissa E. Graebner, 2008. "What do they know? The effects of outside director acquisition experience on firm acquisition performance," Strategic Management Journal, Wiley Blackwell, vol. 29(11), pages 1155-1177, November.
    20. Daphne W. Yiu & Yuan Lu & Garry D. Bruton & Robert E. Hoskisson, 2007. "Business Groups: An Integrated Model to Focus Future Research," Journal of Management Studies, Wiley Blackwell, vol. 44(8), pages 1551-1579, December.
    21. Sumit K. Majumdar & Arnab Bhattacharjee, 2014. "Firms, Markets, and the State: Institutional Change and Manufacturing Sector Profitability Variances in India," Organization Science, INFORMS, vol. 25(2), pages 509-528, April.
    22. Jeongil Seo & Daniel L. Gamache & Cynthia E. Devers & Mason A. Carpenter, 2015. "The role of CEO relative standing in acquisition behavior and CEO pay," Strategic Management Journal, Wiley Blackwell, vol. 36(12), pages 1877-1894, December.
    23. Xufei Ma & Xiaotao Yao & Youmin Xi, 2006. "Business group affiliation and firm performance in a transition economy: A focus on ownership voids," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 467-483, December.
    24. 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.
    25. Katics, Michelle M & Petersen, Bruce C, 1994. "The Effect of Rising Import Competition on Market Power: A Panel Data Study of U.S. Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 277-286, September.
    26. Yuan Li & Haowen Chen & Yi Liu & Mike Peng, 2014. "Managerial ties, organizational learning, and opportunity capture: A social capital perspective," Asia Pacific Journal of Management, Springer, vol. 31(1), pages 271-291, March.
    27. Luis Alfonso Dau, 2013. "Learning across geographic space: Pro-market reforms, multinationalization strategy, and profitability," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(3), pages 235-262, April.
    28. Yunshi Liu & Yi-Jung Chen & Linda C. Wang, 2017. "Family business, innovation and organizational slack in Taiwan," Asia Pacific Journal of Management, Springer, vol. 34(1), pages 193-213, March.
    29. Harry P. Bowen & Margarethe F. Wiersema, 2005. "Foreign‐based competition and corporate diversification strategy," Strategic Management Journal, Wiley Blackwell, vol. 26(12), pages 1153-1171, December.
    30. Christine M. Chan & Takehiko Isobe & Shige Makino, 2008. "Which country matters? Institutional development and foreign affiliate performance," Strategic Management Journal, Wiley Blackwell, vol. 29(11), pages 1179-1205, November.
    31. Francisco Diaz Hermelo & Roberto Vassolo, 2010. "Institutional development and hypercompetition in emerging economies," Strategic Management Journal, Wiley Blackwell, vol. 31(13), pages 1457-1473, December.
    32. Kuo-Pin Yang & Gavin M. Schwarz, 2016. "A Multilevel Analysis of the Performance Implications of Excess Control in Business Groups," Organization Science, INFORMS, vol. 27(5), pages 1219-1236, October.
    33. Changhyun Kim & Richard A. Bettis, 2014. "Cash is surprisingly valuable as a strategic asset," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 2053-2063, December.
    34. Patricio Duran & Marc van Essen & Pursey P. M. A. R. Heugens & Tatiana Kostova & Mike W. Peng, 2019. "The impact of institutions on the competitive advantage of publicly listed family firms in emerging markets," Post-Print hal-02312178, HAL.
    35. Gavin M. Schwarz & Kuo-Pin Yang & Christine Chou & Yu-Jen Chiu, 2020. "A classification of structural inertia: Variations in structural response," Asia Pacific Journal of Management, Springer, vol. 37(1), pages 33-63, March.
    36. Ming Pu & Pek-Hooi Soh, 2018. "The role of dual embeddedness and organizational learning in subsidiary development," Asia Pacific Journal of Management, Springer, vol. 35(2), pages 373-397, June.
    37. Mona Makhija, 2003. "Comparing the resource‐based and market‐based views of the firm: empirical evidence from Czech privatization," Strategic Management Journal, Wiley Blackwell, vol. 24(5), pages 433-451, May.
    38. Michael N. Young & Mike W. Peng & David Ahlstrom & Garry D. Bruton & Yi Jiang, 2008. "Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 196-220, January.
    39. repec:bla:jfinan:v:58:y:2003:i:3:p:1301-1327 is not listed on IDEAS
    40. Klaus E Meyer & Mike W Peng, 2016. "Theoretical foundations of emerging economy business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(1), pages 3-22, January.
    41. Brian K. Boyd, 1995. "CEO duality and firm performance: A contingency model," Strategic Management Journal, Wiley Blackwell, vol. 16(4), pages 301-312.
    42. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
    43. Elitsa R Banalieva & Alvaro Cuervo-Cazurra & Ravi Sarathy, 2018. "Dynamics of pro-market institutions and firm performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(7), pages 858-880, September.
    44. Kee‐Hong Bae & Jun‐Koo Kang & Jin‐Mo Kim, 2002. "Tunneling or Value Added? Evidence from Mergers by Korean Business Groups," Journal of Finance, American Finance Association, vol. 57(6), pages 2695-2740, December.
    45. 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.
    46. Steven Globerman & Mike Peng & Daniel Shapiro, 2011. "Corporate governance and Asian companies," Asia Pacific Journal of Management, Springer, vol. 28(1), pages 1-14, March.
    47. Ronald C. Anderson & David M. Reeb, 2003. "Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1328, June.
    48. Sea-Jin Chang & Chi-Nien Chung & Ishtiaq P. Mahmood, 2006. "When and How Does Business Group Affiliation Promote Firm Innovation? A Tale of Two Emerging Economies," Organization Science, INFORMS, vol. 17(5), pages 637-656, October.
    49. Yermack, David, 2006. "Flights of fancy: Corporate jets, CEO perquisites, and inferior shareholder returns," Journal of Financial Economics, Elsevier, vol. 80(1), pages 211-242, April.
    50. Chien-Nan Chen & Wenyi Chu, 2012. "Diversification, resource concentration, and business group performance: Evidence from Taiwan," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1045-1061, December.
    51. Mike W. Peng & Sergey Lebedev & Cristina O. Vlas & Joyce C. Wang & Jason S. Shay, 2018. "The growth of the firm in (and out of) emerging economies," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 829-857, December.
    52. Seung-Hyun Lee & Sungjin Hong, 2012. "Corruption and subsidiary profitability: US MNC subsidiaries in the Asia Pacific region," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 949-964, December.
    Full references (including those not matched with items on IDEAS)

    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. Jeoung Yul Lee & Shufeng (Simon) Xiao & Surender Munjal, 2023. "How business groups build globally relevant knowledge from local contexts? Exploring the double-edged sword effect of cultural diversity," Asian Business & Management, Palgrave Macmillan, vol. 22(5), pages 2189-2224, November.
    2. Jianfeng Wu & Dean Xu & Phillip Phan, 2011. "The effects of ownership concentration and corporate debt on corporate divestitures in Chinese listed firms," Asia Pacific Journal of Management, Springer, vol. 28(1), pages 95-114, March.
    3. Purkayastha, Saptarshi & Veliyath, Rajaram & George, Rejie, 2019. "The roles of family ownership and family management in the governance of agency conflicts," Journal of Business Research, Elsevier, vol. 98(C), pages 50-64.
    4. Mike W. Peng & Sergey Lebedev & Cristina O. Vlas & Joyce C. Wang & Jason S. Shay, 2018. "The growth of the firm in (and out of) emerging economies," Asia Pacific Journal of Management, Springer, vol. 35(4), pages 829-857, December.
    5. Kuo-Pin Yang & Gavin M. Schwarz, 2016. "A Multilevel Analysis of the Performance Implications of Excess Control in Business Groups," Organization Science, INFORMS, vol. 27(5), pages 1219-1236, October.
    6. Mike W. Peng & Joyce C. Wang & Nishant Kathuria & Jia Shen & Miranda J. Welbourne Eleazar, 2023. "Toward an institution-based paradigm," Asia Pacific Journal of Management, Springer, vol. 40(2), pages 353-382, June.
    7. Angelo M. Solarino & Brian K. Boyd, 2020. "Are all forms of ownership prone to tunneling? A meta‐analysis," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 488-501, November.
    8. Shaleen Gopal & K. S. Manikandan & J. Ramachandran, 2021. "Are There Limits to Diversification in Emerging Economies? Distinguishing between Firm‐Level and Business Group Strategies," Journal of Management Studies, Wiley Blackwell, vol. 58(6), pages 1532-1568, September.
    9. Chi-Nien Chung & Xiaowei Luo, 2008. "Institutional Logics or Agency Costs: The Influence of Corporate Governance Models on Business Group Restructuring in Emerging Economies," Organization Science, INFORMS, vol. 19(5), pages 766-784, October.
    10. Luis Alfonso Dau & Randall Morck & Bernard Yin Yeung, 2021. "Business groups and the study of international business: A Coasean synthesis and extension," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(2), pages 161-211, March.
    11. Christine M. Chan & Jialin Du, 2021. "The dynamic process of pro-market reforms and foreign affiliate performance: When to seek local, subnational, or global help?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1854-1870, December.
    12. Banerjee, Pradip & Dhole, Sandip & Mishra, Sagarika, 2023. "Operating performance during the COVID-19 pandemic: Is there a business group advantage?," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    13. Di Cai & Jin-hui Luo & Di-fang Wan, 2012. "Family CEOs: Do they benefit firm performance in China?," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 923-947, December.
    14. 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.
    15. Min, Byung-seong, 2021. "Heterogeneity of R&D in family firms," Journal of Business Research, Elsevier, vol. 129(C), pages 88-95.
    16. repec:dau:papers:123456789/5922 is not listed on IDEAS
    17. Khosa,Amrinder & Ahmed,Kamran & Henry,Darren, 2019. "Ownership Structure, Related Party Transactions, and Firm Valuation," Cambridge Books, Cambridge University Press, number 9781108492195, October.
    18. Carney, Michael & Estrin, Saul & Van Essen, Marc & Shapiro, Daniel, 2017. "Business groups reconsidered: beyond paragons and parasites," LSE Research Online Documents on Economics 87340, London School of Economics and Political Science, LSE Library.
    19. Michael Young & Terence Tsai & Xinran Wang & Shubo Liu & David Ahlstrom, 2014. "Strategy in emerging economies and the theory of the firm," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 331-354, June.
    20. Yoo, Taeyoung & Sung, Taeyoon, 2015. "How outside directors facilitate corporate R&D investment? Evidence from large Korean firms," Journal of Business Research, Elsevier, vol. 68(6), pages 1251-1260.
    21. Mike Peng & Andrew Delios, 2006. "What determines the scope of the firm over time and around the world? An Asia Pacific perspective," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 385-405, 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:kap:asiapa:v:41:y:2024:i:1:d:10.1007_s10490-022-09842-9. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.