Product innovation and employees’ slack time. The moderating role of firm age & size

Abstract

A growing mass of study has underscored that slack resources are fundamental for innovation. However, empirical research has generated inconclusive findings that have invigorated an ongoing scholarly discussion about which sorts of slack resources are most beneficial to innovation. To resolve this debate, an increasing number of scholars contend that the use of slack resources to explain the slack-performance relationship could be contingent on both the firms’ strategic positions and their firm-level characteristics. In these debates, the slack time has received less attention from scholars. However, while practical usage of slack time by the multinational corporation has been reported to affect performance, the empirical tendency linking it to any objective performance indicators of the firm such as innovation is few. As a result of this, this study conducts a two-way and three-way moderation effect by extracting two generic and most researched firm-level attributes, which are firm age and size to explain the slack-performance relationship of innovative firms. In order to extend the scant literature on slack time, this study draws on the moderating role of both firm age and size. The three-way estimation of slack time-age-size-performance relationship employs a cross-section dataset from the World Bank Enterprise and Innovation Follow-up surveys of 9503 firms in 11 countries of sub-Saharan Africa. The study uses an Instrumental Variable binary treatment model with a direct-2sls for the central estimation, and a Tobit model for the robustness checks. The results of this study reveal that age and size significantly moderate the impact of slack time on innovation. In particular, the findings indicate that the age and size of firms efficiently moderate the slack-performance relationship to support the introduction of innovation. The study further reveals that a three-way estimation of the variables results in a significant decline to the optimisation of firm-level innovation. For experts, the findings offer an essential insight as they reveal how top managers can manage with the allotment of slack time to perhaps specific employees in fostering a compelling introduction of innovation.

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