The Department of Management presents visiting scholar Jonathan O’Brien, associate professor of strategic management at the Rensselaer Polytechnic Institute, on Tuesday, November 18 in CBA 222 at 2 p.m. He will be presenting on “The Value of Slack in Managing Relationships with Internal and External Stakeholders.”

Abstract: Although available slack facilitates adaptation to unfolding contingencies, powerful stakeholders may pressure managers to allow that slack to be absorbed. We find that the relationship between available slack and absorbed slack reflects the pattern of bargaining over the allocation of slack resources. With external stakeholders such as customers and suppliers, available slack affords a bargaining chip which results in more favorable trade terms and hence reductions in working capital. Conversely, internal stakeholders such as employees have stronger relational ties to the firm, inducing managers to be more accommodating and therefore more likely to allow some slack to be absorbed by these stakeholders. We find that the net effect is that available slack yields both higher gross margins and higher financial performance. However, when external stakeholders have relational ties to the firm, such as with keiretsu affiliated firms in Japan, the benefits of available slack when negotiating with external stakeholders are attenuated.