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 translated into the growth of transition economy firms. It compares human resource slack and financial slack in terms of their 'proactivity' to unveil their differing effects on firm growth. This paper further highlights firm-level entrepreneurial activities as a mechanism through which these resources are translated into firm growth. Data was collected from senior managers through a questionnaire survey from manufacturing firms in China's Zhejiang province. This paper demonstrates that not all slack resources are readily turned into firm growth as argued in most of prior studies. In particular, only proactive HR slack is directly related to firm growth, while financial slack fuels firm growth via HR slack. Besides, HR slack also propels firm growth partially through various corporate entrepreneurial activities. This paper proposes and demonstrates that 'proactivitity' is a crucial dimension that explains the differing effects of slack resources on firm growth. In addition, corporate entrepreneurial activities are an underlying mechanism through which HR slack is translated into firm growth. [PUBLICATION ABSTRACT]