Slack-resources hypothesis: a critical
analysis under a multidimensional
approach to corporate social performance
Purpose – The purpose of the paper is to test the slack-resources hypothesis in corporate social
Design/methodology/approach – The paper uses the technique of panel data in a sample of 624
American listed companies from 2001 to 2007. The literature review builds on the contradictions
between the instrumental stakeholder theory and the slack-resources hypothesis to argue that both
concepts are not fully compatible.
Findings – The results indicate that prior ﬁnancial performance, measured as market value added,
positively affects CSP. The results further conﬁrm that slack resources are assigned to speciﬁc areas of
involvement of CSP (product issues, community relations, environmental issues, employee relations and
diversity of the work force), rather than to a uniﬁed conception of CSP.
Research limitations/implications – The current trend in social responsibility regards Friedman’s
arguments as old-fashioned and assumes the instrumental stakeholder to be true. The results presented
here indicate that part of Friedman’s claims may be occurring in reality, so further investigation is needed
before they are disregarded.
Practical implications – The multidimensional nature of CSP, here proposed and conﬁrmed by the
exploratory models, indicates that each dimension of social performance may be impacted by the
availability of funds different intensities; and according to the instrumental view (assuming the virtuous
circle is true), investment in each particular dimension may provide a different level of return to the ﬁrm.
Originality/value – The slack resources hypothesis has been the least researched of the two
hypotheses relating to the corporate social and ﬁnancial performance (CSP and CFP) links. Although the
slack resources hypothesis may explain the relation as well as the good management hypothesis, most
studies tend to focus on the ﬁrst one, basing their argumentation on the assumption that superior CFP
comes as a result of a strategic CSP.
Keywords Corporate social performance, Corporate social responsibility, Financial performance,
Slack-resources, Panel data, Stakeholders, Market value
Paper type Research paper
The slack resources hypothesis has been the least researched of the two hypotheses
relating to the corporate social and ﬁnancial performance (CSP and CFP) links. Although the
slack resources hypothesis may explain the relation as well as the good management
hypothesis, most studies tend to focus on the ﬁrst one, basing their argumentation on the
assumption that superior CFP comes as a result of a strategic CSP.
In an analysis of previous researches, Margolis and Walsh (2003) observed that the
slack-resources hypothesis was tested in 22 of 127 studies. Out of those, only two (see
Johnson and Greening, 1999; Waddock and Graves, 1997) have used appropriate CSP
data – calculated measures as opposed to perceived measures. Furthermore, recent
research has uncovered ﬂaws in regards to the CSP construct, the use of control variables
and estimation methods, which were not considered as major issues in the past.
DOI 10.1108/17471111211234879 VOL. 8 NO. 2 2012, pp. 257-269, Q Emerald Group Publishing Limited, ISSN 1747-1117
SOCIAL RESPONSIBILITY JOURNAL
Tiago Melo is based at the
Facultad de Economı
Empresa, Universidad de
The author would like to thank
the Spanish Ministry of
Education and Science-FEDER
(Project SEJ2007-67496) and
the Ibero-American Chair in
Management and Corporate
for their ﬁnancial support for