Modeling Organizational Slack: An Empirical Investigation

1985| Working Paper No. 856

Organizational slack is a variable frequently used in organization studies to predict such organizational processes as search behavior, innovation, goal conflict, political behavior, and risk taking. However, it has remained a fairly ambiguous construct, both theoretically and operationally. This paper addresses the need for a more precise theoretical definition and empirical examination of organizational slack. Three models of organizational slack from the organizations literature are contrasted with notions of slack firm economics and accounting. Then, a new model of slack is deveoped and tested using financial data from a sample of 30 computer firms on the COMPUSTAT data base.