The Impact of Absorbed and Unabsorbed Slack on Firm Profitability: Implications for Resource Redeployment
Resource Redeployment and Corporate Strategy
ISBN: 978-1-78635-508-9, eISBN: 978-1-78635-507-2
Publication date: 31 August 2016
Abstract
This paper undertakes an empirical analysis of the impact of absorbed and unabsorbed slack, employing three different measures for each slack type, on firm profitability. We find that unabsorbed slack has a more favorable influence on future firm profitability than absorbed slack. While all the absorbed slack indicators have a significant negative influence on future profitability, the three unabsorbed slack indicators present positive, negative, and non-significant influences, respectively. The fewer constraints of unabsorbed slack on the redeployment to exploit new opportunities point to its comparative advantage over absorbed slack. We find evidence for the differential impact of absorbed versus unabsorbed slack on profitability in firms with lower levels of slack, which suggests firms prefer to withdraw resources from current business and redeploy them to develop new and more favorable business opportunities.
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Acknowledgements
Acknowledgments
We acknowledge the interesting and valuable comments and feedback received from all participants in the special conference on “Corporate strategy and resource redeployment” held in Strasbourg from November 1 to 3, 2015, and especially to Timothy Folta and Will Mitchell
Citation
Argilés-Bosch, J.M., Garcia-Blandon, J. and Martinez-Blasco, M. (2016), "The Impact of Absorbed and Unabsorbed Slack on Firm Profitability: Implications for Resource Redeployment", Resource Redeployment and Corporate Strategy (Advances in Strategic Management, Vol. 35), Emerald Group Publishing Limited, Leeds, pp. 371-395. https://doi.org/10.1108/S0742-332220160000035012
Publisher
:Emerald Group Publishing Limited
Copyright © 2016 Emerald Group Publishing Limited