Performance below Aspirations, Cultural Motivations of Owners and Slack

In this paper, we study how organizational slack changes in Japanese firms when performance falls below the aspiration level. Furthermore, we also examine the contingency of the owners’ culture and institutional background in understanding how the mix of different types of slack is affected when performance falls below aspirations. We consider two types of owners who display very distinct institutional and cultural differences: relational and transactional. Our results indicate that when performance falls below aspiration, relational ownership leads to an increase in absorbed slack, but a decrease in unabsorbed and potential slack.