Slack resources and growth performance: The mediating roles of product and process innovation capabilities

Abstract

Slack resources are essential to organizations’ capacity to strategize and explore new opportunities. However, due to causal ambiguity and temporal separation, there is no consensus about the specific effects on long-term organizational performance, nor the processes by which the effects manifest themselves. Two forms of slack are reported as having an impact on the performance and competitiveness of firms – low-discretion slack and high-discretion slack. This study examines the varied relations between these two forms of slack and long-term performance – growth, by investigating the mediating effects of technical innovation capabilities. A survey was conducted on 217 Chinese firms, with data analysed using structural equation modelling to test the hypotheses. The empirical results show no relation of low-discretion slack, while high-discretion slack has a significant association with growth performance via both product innovation capability and process innovation capability.