R&D EXPENDITURE VOLATILITY AND FIRM PERFORMANCE: ORGANIZATIONAL AND ENVIRONMENTAL CONTEXTS

Tim Swift ()
Additional contact information
Tim Swift: Management Department, St. Joseph's University, 5600 City Avenue, Philadelphia, Pennsylvania 19131, United States of America

International Journal of Innovation and Technology Management (IJITM), 2013, vol. 10, issue 04, 1-21

Abstract: A common view is that organizational slack diminishes firm performance by providing management the opportunity to invest in pet projects or to engage in empire-building. An opposing perspective argues that organizational slack enhances innovation by enabling firms to invest in promising new R&D projects as soon as they are discovered, or to maintain R&D during operating shortfalls. In this paper, we identify empirically a context within which organizational slack enhances firm performance. Recent research indicates that firms that proactively manage their R&D functions by frequently and substantially modifying R&D expenditure over time are superior performers. I find that higher levels of organizational slack increase the positive relationship between R&D expenditure volatility and firm performance. Evidence presented herein suggests that firms with superior access to discretionary funds held as slack use these resources to fund nascent R&D projects and to mitigate uncertainty, thus driving more commercially valuable innovation. This is one of the few studies providing empirical evidence of the practical value of organizational slack.

Keywords: R&D expenditure volatility; innovation; organizational slack; industry munificence; capital structure; research & development (search for similar items in EconPapers)
Date: 2013
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219877013500132
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijitmx:v:10:y:2013:i:04:n:s0219877013500132

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219877013500132

Access Statistics for this article

International Journal of Innovation and Technology Management (IJITM) is currently edited by H K Tang

More articles in International Journal of Innovation and Technology Management (IJITM) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().