Organizational slack is excess resources that influence various organizational phenomena, including adaptation, formation of dominant coalition, political behaviors, centralization, bureaucracy, risk preferences and innovation. As for its influences on organizational performance, however, scholars disagree whether the relationship is positive, negative, or curvilinear. We empirically examined moderating effectes of environmental, as well as organizational characteristics to argue that the form of relationship between organizational slack and organizational performance differs by the degree of environmental variability, search width, and by organizational age. Our analyses of 37 Japanese pharmaceutical firms between 1991 and 2010 (616 firm-years) show that organizational slack more negatively influences organizational performance to the extent that environmental variability or search width increase. Organizational age also moderates the relationship such that older firms enjoy more positive influences of organizational slack while younger firms suffer from more negative influences. The results indicate that we may be able to reconcile mutually contradictory findings in prior work by taking environmental, as well as organizational characteristics into consideration. We also discuss our findings' implications on the relationship between organizational slack and the attention-based view of the firm.
