Availability of Slack Resources

Within the confines of the behavioural theory of the firm, the availability of slack resources was proposed by Cyert and March (1963) as a mechanism for maintaining harmony between the various members of coalitions, both within and outside an organisation. According to the theory, managers search for available of slack resources in order to make a specific decision, such as participate in CCI.

Moreover, for the purposes of this research, the nature of the slack resources has a significant impact on the decision regarding CCI in terms of what is given and to whom. Additionally, in the literature, some studies have actually investigated the association of slack resources with corporate giving (Buchholtz et al., 1999;

Seifert et al., 2003; 2004). Similarly, some academics have suggested that slack resources can be used in a discretionary manner (Dimmick and Murray, 1978) or for voluntary issues (Buchholtz et al., 1999).

Under the behavioural theory of the firm lens slack resources have been defined as the disparity between the resources available to the organisation and the payments required to maintain the coalitions (Cyert and March, 1963). Moreover, the availability of slack resources enables the organisation can to absorb failures and to explore new ideas in advance of actual need (Rosner, 1968). According to another definition, slack resources are defined as the pool of resources in an organisation that is in excess of the minimum necessary to produce a given level of organisational output (Nohria and Gulati, 1996). That is, in these authors’

definition of slack resources, the emphasis is placed on the resources, in other words, on the inputs (ibid). Later, Bush (2002), placing the emphasis on output, proposed that firms can obtain slack resources by cutting down the amount of output that will be offered to the customers. In addition, this scholar pointed out that there are some characteristics that differentiate slack resources from buffers.

That is, as well as the physical entities, such as cash, people, and machine capacity, that constitute slack resources a firm can use buffers to protect

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themselves from environmental fluctuations (ibid). These are somewhat abstract strategies, such as, preventative maintenance, future contracts and sales smoothing. In other words, slack resources protect the firm from internal fluctuations, whereas, buffers form barriers to those outside. Another difference between these two concepts is that firms employ slack resources and buffers under different conditions. For example, they use buffers when there is high resource dependency and slack resources in situations where there are conflicting internal and external demands (Sharfman et al., 1988).

According to Bourgeois (1981), slack resources serve four primary functions: as an inducement for organisational actors to remain within the system, as a resource for conflict resolution, as a buffering mechanism in the workflow process, and as a facilitator of certain types of strategic or creative behaviour within the organisation (Bourgeois, 1981). Taking all of the above into account, it is expected that stakeholders can be affected directly in an environment that has high slack resources in that if they are aware of their existence then they are likely to increase pressure for their distribution and vice versa. Figure 3.3 includes the assumed relation between slack resources and stakeholder pressure, which leads to the following proposition:

Proposition 5: The availability of slack resources has a direct effect on stakeholder pressures.

Sharfman et al. (1988) stated that the need for slack resources in an organisation is determined at the industrial level in terms of: by the political behaviours of the organisation, slack resources in the market, environmental change and the magnitude of those changes, and at the organisational level by the size, and performance of the organisation. Seifert et al. (2004) gave examples of the forms of slack resources, which include extra inventory, labour, machines, and space and added that these resources can all be deployed for charitable purposes. In addition, Bowen (2007) identified slack resources as financial capital, managerial time, sheer size, and scope of the firm and technological capabilities. In the literature some studies have associated the contribution ratio with the specific forms of slack resources, such as: size (Buchholtz et al., 1999; Bartkus et al.,

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2002; Seifert et al., 2003; Brown, et al., 2006; Gan 2006); financial resources (Griffin and Mahon, 1997); availability of cash resources (Buchholtz et al., 1999;

Seifert et al., 2003; 2004; Gan, 2006) and corporate profitability (Navarro, 1988;

Adams and Hardwick, 1998).

In the conceptual model of CCI, as shown in Figure 3.3, the availability of slack resources is proposed as another influence on managerial decision-making on CCI in that it would appear reasonable to assume that CCI will rise and fall according to the availability of slack resources. Further, slack resources for CCI are taken as covering: cash, profitability, size, labour and machinery. This rationale yields the following proposition:

Proposition 6: The availability of slack resources has a direct effect on managerial decision-making on CCI.

Once managers have made the decision to contribute to society, their second step is to determine which type of CCI behaviours they will choose and it is expected that the availability of slack resources as well as their nature will affect this choice. According to the definition of CCI, as discussed in Chapter 2, corporate donations can be non-monetary as well as monetary (Seifert et al., 2004).

Monetary giving can be cash giving through sponsorship, cause-related marketing or philanthropic donation and non-monetary giving can be the use of: company services, finished-goods inventory, facilities, managerial expertise, services and the use of employee time for volunteer work. The CCI model caters for the expectation that the availability of slack resources, both monetary and non-monetary, affects the choice of CCI behaviours and this leads to the following proposition:

Proposition 7: The availability of slack resources influences the managerial decision on the choice between CCI activities.

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Figure 3.3: The Role of Availability of Slack Resources in Influencing CCI

Figure 3.3 shows the conceptual model that includes the three main factors that have an influence on whether a manager elects to engage with CCI and what forms they choose to undertake, namely: stakeholder pressures, the institutional climate and the availability of slack resources. The propositions drawn up after considering each of the influential factors will in turn be used to generate testable hypotheses in chapter 7, as suitable variables can be identified for regression analysis to this end.

By way of explanation as to why there is no link in Figure 3.3 regarding the effect of institutional climate on stakeholder pressures, but there being one for slack resources and the latter the following is put forward. The literature pertaining to the behavioural theory of the firm does not cover the influence of the institutional climate on stakeholder opinions and as the conceptual model draws heavily on this theory, it would be inappropriate to include this link, whereas the relation between slack resources and the institutional environment has been included in this literature and thus, is included. In any case whether this link exists or not is beyond the scope of this thesis, because its aim is to investigate managerial behaviour regarding CCI and not that of stakeholders.

Managerial Decision-making on participation in CCI activities

Managerial Choice

of CCI Behaviours Stakeholder

Pressures

P1

P2

InstitutionalClimate

P3 P4

P5 P6 P7

Availability of Slack Resources

84 3.4 Chapter Summary

In this chapter a conceptual model has been developed for investigating the complex structure behind managerial decision-making regarding CCI. More specifically, this model is to be operationalized to probe what are the drivers, in terms of company characteristics, that influence decision-making on CCI by managers. In the four empirical chapters (Chapters 5, 6, 7 and 8) this model is used as the basis for examining these behaviours and the proposed determinants are tested statistically in Chapter 7 so as to establish their level of influence in this process.

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CH 4 Study Design Strategies, Choosing the Relevant Methodology,