Proceedings of the International Association for Business and Society

Volume 27, 2016

Proceedings of the Twenty-Seventh Annual Meeting

Jegoo Lee, Sang-Joon Kim
Pages 112-121

Does Money Really Talk?
Testing Slack Resource Mechanism of Corporate Responsibility

This paper examines the Slack Resource Mechanism (SRM) in the Corporate Responsibility (CR) literature, proposing that when a firm has enough slacks, it is more likely to engage in CR activities, which eventually improve its financial performance. In order to assess whether or not, and in which contexts SRM really works, this paper reviews two research issues in SRM. Based on literature review, we empirically test two proposed hypotheses with a large-scale longitudinal dataset from 1997 to 2012. We find that firms become involved in CR activities for external stakeholders when they have enough slack resources, and that the slack-induced CR engagements are not favored by the stock market. Based on our research findings, we assure that SRM may need to be reconsidered and further developed.