Distinguishing Useful and Wasteful Slack

Peter Bogetoft*, Pieter Jan Kerstens

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

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Abstract

The literature on organization and strategic management suggests that slack in the form of excess resources may be useful. It may, for example, serve as a buffer against environmental shocks, help decouple organizations, ease planning and implementation, support innovation, and enable effective responses to competitors. In contrast, the economic literature tends to view slack as wasteful. When the same products and services can be produced with fewer resources and slack per se is not assigned any value, slack should be eliminated. The aim of this paper is to reconcile these two perspectives. We acknowledge that slack may be both useful and wasteful. The challenge is how to separate the two. Our approach relies on the simple Pareto idea. If an organization can maintain the same levels of output and slack at lower cost, there is wasteful or nonrationalizable spending. We develop ways to measure the extent to which total spending can be rationalized and show how to statistically estimate and test the usefulness of the available slack using bootstrapping.
OriginalsprogEngelsk
TidsskriftOperations Research
Antal sider18
ISSN0030-364X
DOI
StatusUdgivet - 28 dec. 2022

Bibliografisk note

Epub ahead of print. Published online: 28. December 2022

Emneord

  • Organizational slack
  • Rationalization
  • Estimation
  • Testing
  • Bootstrapping

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