AN EMPIRICAL EXAMINATION OF A MEDIATING MECHANISM UNDERLYING THE INFLUENCE OF ORGANIZATIONAL SLACK ON ORGANIZATIONAL PERFORMANCE

Abstract

 It often is assumed that cognition of decision makers mediates influences of organizational slack on various phenomena observed at organizations, including innovation, risk taking, and organizational growth. However, the mediating role played by managerial cognition per se is rarely examined empirically. Accordingly, irrespective of rich empirical support for associations between organizational slack and various organizational phenomena, we have yet fully understood underlying mechanisms of influences of organizational slack. Furthermore, it also is left underexamined whether the association between organizational slack and organizational phenomena is an indication of causal relationships in that the former is an antecedent of the latter. We aim to address this dearth of research by empirically examining whether managerial attention mediates influences of organizational slack on organizational growth. Our empirical analysis of the Japanese textile industry between 2004 and 2020 shows that attention of decision makers on external issues mediates the relationship between organizational slack and organizational growth. Specifically, we show that organizational slack is negatively associated with external attention of decision makers, while the external attention is positively associated with organizational growth. Our analyses address potential endogeneity of organizational slack to provide robust support for the hitherto unvalidated rationale employed by the prior work. The competitive mediation uncovered by our analysis may also help us to explain contradictory influences of organizational slack, or one of the unresolved questions in the research of organizational slack.