Dess and Beard (1984) identify three key dimensions of the organizational environment: munificence, complexity and dynamism. Each of these dimensions is arguably a powerful influence upon managerial decision-making and thus in turn organizational performance. Moreover, it is possible to derive strong arguments on the potentially linear and nonlinear impact of these three environmental dimensions. Environmental munificence is constituted by “the scarcity or abundance of critical resources” over which organizations have little direct control (Castrogiovanni1991, 452). A high degree of munificence is therefore typically thought to buffer organizations from environmental pressures because it generates financial and organizational slack that can, if used effectively, facilitate both organizational stability and growth (Cyert and March 1963; Dess and Beard 1984). Organizations operating in a highly munificent environment can afford to deliver more and better provisions, as well as hire better quality staff, whereas organizations facing a less resource rich context may confront a material restriction on their responsiveness, effectiveness, hiring practices and the range of discretionary services they can offer (Boaden and Alford 1969).Although the accrual of a greater fund of residual resources might be thought unproblematic, it is nevertheless conceivable that organizations can have “too much of a good thing”. Organizational slack may be bad for performance, on the one hand, because it leads managers to become complacent about the need to monitor performance improvement effectively, or, on the other, because it leads them to become overconfident in their ability to deliver more and better services. Empirical evidence on the relationship between objective measures of organizational slack
and innovation in the private sector suggests that there is an inverted u-shaped relationship between slack and innovation (Nohria and Gulati 1996). It is highly plausible that this relationship will hold too for the connection between slack and
Dess and Beard (1984) identify three key dimensions of the organizational environment: munificence, complexity and dynamism. Each of these dimensions is arguably a powerful influence upon managerial decision-making and thus in turn organizational performance. Moreover, it is possible to derive strong arguments on the potentially linear and nonlinear impact of these three environmental dimensions. Environmental munificence is constituted by “the scarcity or abundance of critical resources” over which organizations have little direct control (Castrogiovanni1991, 452). A high degree of munificence is therefore typically thought to buffer organizations from environmental pressures because it generates financial and organizational slack that can, if used effectively, facilitate both organizational stability and growth (Cyert and March 1963; Dess and Beard 1984). Organizations operating in a highly munificent environment can afford to deliver more and better provisions, as well as hire better quality staff, whereas organizations facing a less resource rich context may confront a material restriction on their responsiveness, effectiveness, hiring practices and the range of discretionary services they can offer (Boaden and Alford 1969).Although the accrual of a greater fund of residual resources might be thought unproblematic, it is nevertheless conceivable that organizations can have “too much of a good thing”. Organizational slack may be bad for performance, on the one hand, because it leads managers to become complacent about the need to monitor performance improvement effectively, or, on the other, because it leads them to become overconfident in their ability to deliver more and better services. Empirical evidence on the relationship between objective measures of organizational slackand innovation in the private sector suggests that there is an inverted u-shaped relationship between slack and innovation (Nohria and Gulati 1996). It is highly plausible that this relationship will hold too for the connection between slack and
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