Organizational Slack and Risk‐taking Behaviour: Tests of Product Pricing Strategy

Abstract

Organizational change inevitably involves uncertainty and hence some risk taking. Tests the relationship between organizational slack and risk taking in organization decision making, and thus provides some evidence on the role or organizational variables in risk‐taking behaviour. Product pricing strategies are identified and characterized with respect to risk. Organizational slack is measured using various financial variables. Results indicate that firms which have increases in organizational slack prior to the introduction of new products are more likely to adopt a higher risk product pricing strategy. Also discusses implications regarding the measurement of slack using financial variables.

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