ORGANIZATIONAL SLACK AND FIRMS

INTERNATIONALIZATION :
A LONGITUDINAL STUDY
OF HIGH-TECHNOLOGY FIRMS
GROUP 2
1.
2.
3.
4.

Leni Nur Pratiwi

M10324055
Afriyanti Hasanah M10324057
Randy Heriyanto
M10324058
Dimas Sumitra Danisworo
M10324053
5. Endah Dwi Kusumastuti
M10324059

METHODS

SampleSelection
306companiesinHightechnologyindustry(Taiwan
EconomicJournalTEJ)
InternationalfirmsdatafromTEJandMarket
ObservationPostSystemdatabase
OrganizationalSlackwascollectedfromtheTEJ
Selectfrom2000to2005(sixyears)

DEPENDENT VARIABLES
Internationalization

Internationalizationoffirmsweremeasuredby:
ForeignSales:Foreignsales/totalsales
ForeignAssets:ForeignAssetasapercentageof
totalassets
Geographicdispersion:thenumberofcountries
inwhichafirmhassubsidiaries.
Culturalandinstitutionalvariety

INDEPENDENT VARIABLES

Independentvariables
HighdiscreationslackandLowdiscretionslack
(OrganizationalSlack)
thewayofmeasureslackresources:
Questionnaires
financialindicator
Thesehaveusuallybeenselectedbyscholars
Theymorenonreactive
thisresearchuse:
CurrentratioasHighdiscreationslacksproxy
Equity/DebtratioasLowdiscretionslacksproxy
Curvilineareffectsweremeasuredbycurrentratiosquareand
equity/debtsquare

CONTROL VARIABLES &

ANALYTICAL
APPROACH

Firm
Firm
Performance
Performance

R
R&
&D
D
intensity
intensity

Advertising
Advertising
Intensity
Intensity

Firm
Firm Size
Size

Firm
Firm Age
Age

CONTROL
VARIABLE
S

Degree
Degree of
of
Diversivication
Diversivication

CONTROL VARIABLES

Firm Age
Calculated as
the number of
years since
incorporation

Firm Size
Typically related
to extensive
international
activities
Measured as the
logarithm of sales
in given year

Firm
Performanc
e
Calculated
as the
three-year
average of
ROA

CONTROL VARIABLES

R&D Intensity
Measured by the
ratio of R&D
expenses to firm
sales

Advertising
Intensity

Degree of
Diversifications

Measured by the
ratio of advertising
expenses to firm
sales

Controlled by using
the HerdinfahlHirschman index

ANALYTICAL APPROACH

Firm-year
records
For internalization
analysis

General Linear
Squares (GLS)
random effects
model
To test the hypotesis

Why not
OLS?

GLS

Can result biases estimates due to

unobserved heterogeneity

More efficient GLS estimation technique

GLS approach does not allow for VIF. The
recommendation is that , as long as VIF
is less than 10, collinearity is not a
concern. The highest VIF was 2.61 in
this study
Multicollinearity was unlikely to occur in
this study

RESULTS

Results
Table 1

Table 2
A curvilinear relationship between
The linear main
result
high effect
discretion
slack and firms
provides general
support for
internalization
inslack
hypotheses
Low-discretion
is only 2
both hypotheses
1&3
was
found
linearly
associated with firm
internationalization

MANAGERIAL RELEVANCE
Managers should frequently remind
themselves to forego the attitude of
managerial complacency or irrational
optimism
Managers who use such organizational
slack in a firm must consider that slack
forms lead to different kinds of
effectiveness
Managers perceive low-discretion
slack as necessary to expand
international market but it may
significantly impact a firms interest
stock price
Managers must carefully scrutinize lowdicretion slack seek to accumulate
more additional resources to support
their existing foreign activities

LIMITATIONS
Opportunities for Future
Research
Examine the relationship explored in this study in various types of economies

Key Study Limitations

Authors hope that their study

Authors hope that their study

Sample was limited
to aTaiwanese
public firms in the
represents
pivotal step toward
Research that is ableindustry
to surmount the data collection challenges associated
high-technology
a
better
understanding
of theinteresting insights on
with the use of accounting contructs
should provide
manner
whichnot
organizational
the relationship between
slack
firms internationalization
Organizational
slackorganizational
may
fullyandcapture
nonslacksuch
impacts
strategyslack
financial variables
asglobal
intangible
resources
Examine the relationship between organizational slack and entry mode
This study does not take into
choiceaccount
environmental factors which may affect firm
internalization
Future research would benefit from a clearer description of
internationalization types

THANK YOU
FOR YOUR ATTENTION