The silence of the slacked: The negative side effect of slack on problemistic search

Organizational slack is associated with various positive effects on the organization. By focusing on slack’s cushioning property, which shields the firm from external adversities, this article discusses how slack can also mute important external stimuli for problemistic search and increase adverse self-enhancement effects when an organization performs below aspirations. We use panel data on publicly traded firms to test how shareholder voice affects problemistic search and how slack negatively moderates this relationship. We also show that problemistic search suffers more in self-enhancing firms as a firm’s slack increases. We contribute to the behavioral theory of the firm by unfolding the negative side of slack and demonstrating how differentiation between internal and external coalition perspectives unfolds new sides of this concept. JEL Classification: L20, M10