The dynamic slack‐performance relationship from an efficiency perspective

Abstract

The article aims to analyse the behaviour of firms in terms of managing their slack resources from the perspective of efficiency when faced with a generalised crisis. From a sample of 419 Spanish companies in 2006, 2010 and 2014, a cluster analysis was carried out to identify their position in relation to slack resources (whether there was an excess or a deficiency). Taking this position into account, a data envelopment analysis was carried out which allowed the efficiency frontier to be analysed with respect to the different performances of the company. The results show firstly how companies' resource endowment is affected as a result of adaptation to the crisis and, in turn, how said adaptations accentuate the efficiency of the companies. The management of capacity and resources is an element that companies have failed to prioritise. The recent financial crisis and the current crisis underline the importance of maintaining and managing these resources beyond the vision of simply reducing slack as shown by many companies. The study has two particularities. First, it analyses the changes before, during and after one of the most important crises. Second, the complexity of the phenomenon means that a multiple methodology must be adopted.

The effect of slack configurations on company performance from a dynamic perspective

“…The different configurations were identified by means of a cluster analysis of the variables that represent each type of slack. The number of clusters was identified using Ward's hierarchical clustering method similar to the previous configuration analysis (Agustí, Velasco, & Galán, 2021; Marlin & Geiger, 2015b; Mousa et al, 2013) assisted by the graphical interpretation of a dendrogram analysis. After the clusters were identified, an ANOVA was performed to determine differences in the variables of the slack resources and therefore if they represented distinct and different configurations of the slack resources.…”

“…Regarding the consideration of the slack resources, researchers have used a wide variety of measures (for a review, see Carnes et al, 2019; Daniel et al, 2004). Contrary to other researchers (Marlin & Geiger, 2015a), we used a single indicator for each type of slack resource (Agustí, Velasco, & Galán, 2021) due to the high correlation between the measurements of the different types of slack (Marlin & Geiger, 2015a; Mousa et al, 2013). Review articles in the literature present that the most common measures to evaluate slack resources are current ratio (CR) for the available slack, the debt/equity ratio (D/E) for potential slack, considering that a lower value of this indicator shows a higher slack, and the ratio of general sales and administrative expenses/sales for recoverable slack (Carnes et al, 2019; Daniel et al, 2004).…”

Effects of Rapid Environmental Change and Speed of Decline on Distressed Firms and Turnaround Outcomes

“…We suggest that understanding environmental velocity, with its emphasis on the rate of change, is of particular importance to declining organizations and their strategic turnaround processes. We argue that environmental velocity like munificence (e.g., (Agustí, Velasco, & Galán, 2021;Schmitt et al, 2016)) affects firm performance.…”

“…Both slow and sudden contractions have been postulated by respective researchers as likely settings for failure (Harrigan, 1980). Agustí et al (2021) find that environmental predicaments, exert a significant influence on business efficiency transcending the basic consideration of the volume of assets or slack resources that companies own. Overall, these studies provide evidence that the pace of change (i.e., velocity) in the environment, in terms of its carrying capacity, is an important influence on failing firms.…”

Slack Resources, Corporate Performance, and COVID-19 Pandemic: Evidence from China

“… Findings: The low levels of strategic planning the slack–performance relationship is inverse U shaped. Agustí et al (2021) [ 62 ] “The dynamic slack-performance relationship from an efficiency perspective”. Methodology: Identify the relationship between slack resources configuration and organizational efficiency by DEA analysis.…”