Does strategic planning help firms translate slack resources into better performance?

Abstract

AbstractIs organizational slack good or bad for firm performance? Research addressing this question has obtained mixed results. Such studies have focused mainly on the impact of environmental conditions on the slack–performance relationship. In this study, instead of focusing on the uncontrollable external environment, we consider actions determined by firms internally, in particular strategic planning. Using data from 183 US firms, we explore the connection between organizational slack and firm performance with different levels of strategic planning. The results suggest that at low levels of strategic planning the slack–performance relationship is linear, while at high levels of strategic planning this relationship is inverse U shaped. We discuss the theoretical and practical implications of these findings.