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The purpose of this study is to examine the impact of technological diversification (TD) on enterprise innovation performance, meanwhile focusing on the moderating effects of various organizational slack (i.e. absorbed and unabsorbed slack) and ownership types (i.e. state-owned or privately-owned) in the context of Chinese listed firms.

This study formulates five hypotheses based on organization and agency theories. Our empirical analysis employs a fixed-effect regression estimator with a unique panel dataset of Chinese-listed manufacturing firms and 13,566 firm-year observations over 9 years from 2012 to 2020.

Our findings show that an inverted U-shaped relationship exists between TD and innovation performance, varying with different types of organizational slack and ownership. In state-owned enterprises (SOEs), unabsorbed slack negatively moderates the inverted U-shaped relationship; however, in privately-owned enterprises (POEs), this relationship is positively moderated. Although absorbed slack has negative moderating effects in both SOEs and POEs, its impact is only significant for POEs.

Our results imply that organizational slack has a contrasting impact on the relationship between TD and innovation performance when the type of ownership varies. Therefore, the managers that intend to achieve optimal innovation performance through TD should understand how organizational slack can be leveraged.

This study contributes to the existing literature by applying the relationship between TD and innovative performance to the transition economy, as well as examining the double-edged sword impact of state ownership on firm innovation performance.

This paper aims to examine what firms in Spanish industrial sectors redeployed their resources, depending on their organisational slack (resource excess), when faced with the global economic crisis of 2008.

Various financial measures for slack resources and performance have been analysed from more than 400 Spanish firms from 2006 (pre-crisis) to 2017 (recovery).

The first finding is that every slack is useful against an economic downturn. The results show how industrial companies use their slack resources when faced with a generalised crisis according to the level of slack possessed. The key role of the available slack against this environmental threatens is remarked.

Not every resource is useful against an economic downturn. The results show how industrial companies use their slack resources when faced with a generalised crisis in accordance with the types and levels of slack. The key role of the liquid resources, in particular cash, against this environmental threat is discussed. However, we also observe the behaviour of firms with only a few excess resources and find very similar resource consumption patterns.

Although organisational slack is a well-known concept in management, few studies deal with how companies consume or use other types of resources when confronting a crisis. This paper not only addresses this question but also offers insights for a detailed evaluation of various types of slack during and after a crisis.

This paper explores the relationship between fairness in contracting and the creation of budgetary slack. A laboratory experiment was performed in which privately informed subjects were compensated under either a truth-inducing or slack-inducing incentive contract. Contracting processes were either fair or unfair as defined by procedural justice theory (Leventhal, 1980; Lind & Tyler, 1988). Under the slack-inducing contract, subjects exposed to the fair contracting process created significantly less slack than subjects exposed to the unfair contracting process. Slack created by subjects compensated under the truth-inducing contract was low and insensitive to the fairness or unfairness of the contracting process employed.

Prior research demonstrates a positive relationship between information asymmetry and managers’ use of budgetary slack and thereby suggests that minimizing managers’ private information is a potential tactic for reducing slack in budgets. Asymmetric information, however, often cannot be avoided when specialized technical expertise is required to operate a particular responsibility area. This study contributes to the literature by investigating whether favorable perceptions of fairness mitigate managers’ use of budgetary slack during participative environments in which managers hold private information. Overall, the findings demonstrate the benefits of fair budgeting practices. In particular, survey results suggest that the presence of budgetary slack in efficiency targets is lower for managers who hold favorable fairness perceptions. A gender effect is also demonstrated between perceptions of fairness and the presence of budgetary slack in spending targets. Factor analytical evidence toward the development of a more refined measure of budgetary slack is provided.

This chapter examines the effect an informal control namely trust-in-superior and subordinates’ truthfulness in revealing their private information on budgetary slack. A laboratory experiment was conducted. A one-way analysis of variance (ANOVA) and ordinary least squares (OLS) regression were used to test the hypotheses proposed in this chapter. The independent variables were trust-in-superior and subordinates’ truthfulness in revealing their private information. The dependent variable was budgetary slack. The results indicate that trust-in-superior reduces the budgetary slack created by subordinates under private information condition. In addition, the results show that subordinates’ truthfulness in revealing their private information mediates the effect of trust-in-superior on budgetary slack.

This study extends prior research by proposing a more complete model of the process by which budget slack is created in the organization. The research model proposed in this study suggests that there is an ex-ante as well as an ex-post process by which budget slack is created. In the ex-ante process, environmental uncertainty and budget participation are linked to managers’ propensity to create slack through job-relevant information (JRI). In the ex-post process, the control system determines the slack in the final budget by providing information to superiors about a manager’s performance capability. Thus, the propensity to create slack determines actual slack to the extent that the organization’s control system fails to provide an effective assessment of the manager’s performance capability.

Contrary to expectations, the ex-ante model indicated that participation has a direct, negative effect on propensity to create slack. The largest effect on propensity to create slack, however, was a direct positive link from environmental uncertainty. In the ex-post process, the link between propensity to create slack and segment slack (actual slack created) was moderated by the organization’s control system capabilities. When propensity to create slack is low (high), control system monitoring has little (a great) effect on segment slack created. This finding is consistent with arguments that publicly available information about a manager’s performance capability motivates a higher budget standard.

Prior experimental budgeting research has focused primarily on individuals’ budget setting and little experimental research has examined budgeting in a group setting. Using a controlled experiment, this study extends prior participative budgeting research by examining the effects of aggregation levels of performance feedback and task interdependence on budgetary slack and the effects of different levels of feedback on group performance in a group participative budget setting.

The results suggest that aggregation levels of performance feedback differentially impact budgetary slack and group performance. Providing both group and individual performance feedback increases group performance and reduces budgetary slack compared to providing group performance feedback only. Providing information about other subordinates’ performance further increases group performance and reduces budgetary slack beyond the effects of providing individual workers information only about their own performance. The results indicate that task interdependence also affects the level of budgetary slack. Specifically, high task interdependence groups created more budgetary slack than did low task interdependence groups.

This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.

This paper undertakes an empirical analysis of the impact of absorbed and unabsorbed slack, employing three different measures for each slack type, on firm profitability. We find that unabsorbed slack has a more favorable influence on future firm profitability than absorbed slack. While all the absorbed slack indicators have a significant negative influence on future profitability, the three unabsorbed slack indicators present positive, negative, and non-significant influences, respectively. The fewer constraints of unabsorbed slack on the redeployment to exploit new opportunities point to its comparative advantage over absorbed slack. We find evidence for the differential impact of absorbed versus unabsorbed slack on profitability in firms with lower levels of slack, which suggests firms prefer to withdraw resources from current business and redeploy them to develop new and more favorable business opportunities.

The objective of this study was to extend prior research by examining subordinate–superior information asymmetry as an intervening variable linking budgetary participation and slack. The results indicate two offsetting effects of participation on slack. A significant negative indirect relation between participation and slack was found to act through information asymmetry. Thus, managers reveal private information during the budget process, reducing information asymmetry which subsequently reduces budget slack. These results provide evidence about the inability of past research to confirm a consistent direct relation between budget participation and budget slack.