How are Different Slack Resources Translated into Firm Growth? Evidence from China

Abstract

This paper aims to clarify types of slack resources and mechanisms through which these resources are translatedinto the growth of transition economy firms. It compares human resource slack and financial slack in terms oftheir ‘proactivity’ to unveil their differing effects on firm growth. This paper further highlights firm-levelentrepreneurial activities as a mechanism through which these resources are translated into firm growth. Datawas collected from senior managers through a questionnaire survey from manufacturing firms in China’sZhejiang province. This paper demonstrates that not all slack resources are readily turned into firm growth asargued in most of prior studies. In particular, only proactive HR slack is directly related to firm growth, whilefinancial slack fuels firm growth via HR slack. Besides, HR slack also propels firm growth partially throughvarious corporate entrepreneurial activities. This paper proposes and demonstrates that ‘proactivitity’ is a crucialdimension that explains the differing effects of slack resources on firm growth. In addition, corporateentrepreneurial activities are an underlying mechanism through which HR slack is translated into firm growth.

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