To what extent is slack conditioned on munificence? Extending the behavioral theory of the firm.

Abstract

This dissertation studies the accumulation and "spending" of organizational slack dependent on environmental munificence. Over five decades have passed since the "behavioral theory of the firm" formally introduced the idea of organizational slack into organization theory. That theory constrained the accumulation of slack based on munificence in the organization's environment and suggested that in non-munificent environments organizations would shed themselves of slack. This dissertation extends the "behavioral theory of the firm" by showing that munificence is of limited practical significance as a determinant of slack growth and decline. Removing munificence as a constraint may make the "behavioral theory of the firm" more useful as a theory of organizational behavior. Prior slack strategies are the predominant determinant of current slack strategies. In studying slack patterns, this dissertation also notes the various slack strategies in the interorganizational relationship between manufacturers and their suppliers in the automobile industry. While relationships were poor predictors of slack compared to prior slack accumulation and decline patterns, the accumulation and decline of slack in suppliers versus manufacturers suggests that organizational structures based on resource ownership are changing. While this is not a new idea to those reading the relational contract or cooperative strategy literature, it does offer a "slack strategy" to the rationale for changing organizational forms. The myriad of positive rationale for holding slack competing with the performance penalties for holding slack may have found a solution in the control versus ownership of slack and serve as another reason to engage in cooperative and relational strategies.