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The importance of organisational slack as an unexplored determinant of firm level innovation and performance in the construction context

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posted on 08.06.2016, 11:35 by Christopher Horsthuis
Construction literature forwards innovation as a desirable objective for firms. Innovation is argued to; improve the firm s performance, increase market share, establish a competitive advantage, and ultimately ensure firm survival. Literature has overlooked the role of organisational slack within construction firms as a determinant of innovation despite the concept being well developed within the general management literature. This research uncovers and examines the impact of organisational slack on firm-level innovation as a determinant of innovation within the construction sector. This work forwards organisational slack as an unexplored firm level determinant of innovation within the construction context. Using the resource-based view of the firm, as a framework for firms, the thesis develops links between previously established firm level determinates of innovation to and slack to support its proposal as a determinant of innovation. Following this traditional measures of innovation argued fail to accurately capture innovation in the construction context, with patents represent inventions, while R&D expenditure is not applicable within the construction. Due to these failures of traditional approaches to measuring innovation, firm level performance is forwarded as a proxy measure for innovation outcomes. Developing existing slack literature, this thesis develops hypotheses proposing inverse U-shaped () and U-shaped () relationships between the level of slack and innovation outcomes. The thesis presents mixed method research. Study 1 adopts a deductive research strategy, incorporating statistical analysis to test the hypothesised relationships. The Research Design develops and Archival analysis research method; mirroring the approaches of econometric research found in slack literature. The data analysis explores two contexts: construction and manufacturing, allowing a comparative baseline to be established. The analysis of data from this study reveals that discrepancies in the R2 between the contexts is largely the result of the inability of control variables (Age, Size and Number of employees), to explain variation in firm performance (as a proxy for innovation outcomes) in a construction context, rather than the unsuitability of slack in the construction context. In construction firms, Unabsorbed Slack and Financial Slack demonstrated statistically significant results supporting an inverse U-shaped relationship with firm performance () supporting Hypothesis 1a and 1b. Contrary to this Absorbed Slack and Human Resource Slack demonstrated statistically significant results demonstrating a U-relationship () between slack and performance supporting hypothesis 2b (H2b). Study 2 adopts a deductive research strategy, incorporating semi-structured interviews as a source of primary data in order to explore the slack-innovation relationship in greater depth. Primarily, this study provided evidence to suggest that construction firms do not directly measure innovation. Instead, firms choose to measure outcomes of changes within the firm, typically in terms of measure relating to firm financial performance. Evidence from this study supports the proposal of firm financial performance as a viable proxy for innovation outcomes in Study 1. In addition to this when faced with changes to their environment, participants responses typically supported a positive linear relationship between the level of organisational slack and the firm. This research is the first to examine the impact of organisational slack on construction firm financial performance (as a proxy for innovation). This relationship is curvilinear in nature, however, the results are inconclusive if it is inverse U shaped () or U shaped () based upon conflicting evidence from different slack variables. What can be ascertained however, is that the level of slack impacts firm level performance and theoretically impacts firm level innovation.



  • Architecture, Building and Civil Engineering


© Christopher Horsthuis

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This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at:

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A Doctoral Thesis. Submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy of Loughborough University.