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Organizational slack effects on innovation: the moderating roles of CEO tenure and compensation

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  • Fariss-Terry Mousa
  • Jaideep Chowdhury

Abstract

This study draws on upper echelons theory, the resource based view, and Penrose's theory of firm growth to show that slack resources, specifically financial and human slack, are essential to the research and development (R&D) strategies of organizations. We also suggest that both Chief Executive Officer (CEO) tenure and CEO compensation positively moderate the slack-innovation relationship.The empirical design compromised of panel regression analysis. We tested our hypotheses using all US publicly traded firms between 1993 and 2011.The research results show that firms with excess financial resources are more likely to have higher R&D investments, and to completely understand this relationship we must study CEO tenure and compensation.This study sheds light on central antecedents of firm innovation, it further extends our understanding by investigating the impact of CEO tenure and compensation on the slackinnovation relationship, and it applies a longitudinal design which answers previous calls to investigate this topic in more depth by offering enhanced stability to the results while allowing for different economic scenarios.

Suggested Citation

  • Fariss-Terry Mousa & Jaideep Chowdhury, 2014. "Organizational slack effects on innovation: the moderating roles of CEO tenure and compensation," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(2), pages 369-383, April.
    • Handle: RePEc:taf:jbemgt:v:15:y:2014:i:2:p:369-383
    DOI: 10.3846/16111699.2013.839476
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    Citations

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    Cited by:

    1. Stavros Kourtzidis & Nickolaos G. Tzeremes, 2019. "Investigating the determinants of firm performance," European Journal of Management and Business Economics, Emerald Group Publishing Limited, vol. 29(1), pages 3-22, June.
    2. van Uden, A. & Knoben, J. & Vermeulen, P.A.M., 2014. "Human Capital and Innovation in Developing Countries : A Firm Level Study," Other publications TiSEM be3956d2-96d6-4cda-bf28-d, Tilburg University, School of Economics and Management.
    3. Michael Sheppard, 2020. "The relationship between discretionary slack and growth in small firms," International Entrepreneurship and Management Journal, Springer, vol. 16(1), pages 195-219, March.
    4. Jinguo Zhao & Huanxin Liu & Wei Sun, 2020. "How Proactive Environmental Strategy Facilitates Environmental Reputation: Roles of Green Human Resource Management and Discretionary Slack," Sustainability, MDPI, vol. 12(3), pages 1-15, January.
    5. Andreea N. Kiss & Stephanie Fernhaber & Patricia P. McDougall–Covin, 2018. "Slack, Innovation, and Export Intensity: Implications for Small– and Medium–Sized Enterprises," Entrepreneurship Theory and Practice, , vol. 42(5), pages 671-697, September.
    6. Esther B. Brio & Ilidio Lopes-e-Silva & Javier Perote, 2016. "Effects of opportunistic behaviors on security markets: an experimental approach to insider trading and earnings management," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(3), pages 379-402, December.
    7. Adamu Jibir & Musa Abdu, 2021. "Human Capital and Propensity to Protect Intellectual Properties as Innovation Output: the Case of Nigerian Manufacturing and Service Firms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 595-619, June.
    8. Raghavan J. Iyengar & Malavika Sundararajan, 2019. "Is Firm Innovation Associated With Corporate Governance?," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-24, April.
    9. Yuen, Kum Fai & Wang, Xueqin & Wong, Yiik Diew & Ma, Fei, 2019. "A contingency view of the effects of sustainable shipping exploitation and exploration on business performance," Transport Policy, Elsevier, vol. 77(C), pages 90-103.

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