Transitional economy survivors : the role of slack as a competitive strategy and enabler of long-term business performance

Abstract

The role and impact of resource slack, and its effect on firm performance has been extensively researched as a firm-specific competitive advantage in developed economies. This research postulates that resource slack has a positive effect on performance ahead of economic volatility although aspects of agency theory infer that resource slack may also have an inverse parabolic-shaped relationship with firm performance. Using Penrose�s growth theory, the theory of dynamic capabilities and behavioural theory, this paper provides evidence of the role and effect of resource slack as a component of competitive strategy within an emerging market context. Three major types of slack are investigated within �transitional survivors� which are firms that survived the first transition period from apartheid (1990-1998) along with �transitional economy champions� which are firms that survived both the first transition period as well as the second transition period from the global financial crisis (2004-2012). Findings suggest that through entrepreneurial behaviour and dynamic learning capabilities, unabsorbed and potential financial slack play major roles in encouraging firm resilience, agility and the 23-year survivorship of the champions. Results from the regression analyses indicate that an amalgamation of slack-types is required to have a positive effect on firm performance. In addition, the polynomial regression analyses suggest no evidence of a significant inverse parabolic relationship between slack and performance in the case of South African firms.