Impact of human resource slacks on firm performance: Evidence from a developing country

Purpose of this paper is to investigate whether HR slack leads to improve firm performance, and what is the impact of HR slack in absolute and in relative terms on firm performance in a developing country. It also examines how ownership types moderate the HR slack-performance relationship. The longitudinal data-set of 11,985 firms-year observations from 2000-2009 were used and generalized linear models (GLMs) employed for analyzing data. The findings reveal that (1) absolute HR slack (AHRS) leads to enhance firm performance; (2) AHRS is positively and relative HR slack (RHRS) is negatively affected firm performance; (3) both AHRS and RHRS have inverse U-shaped effects on firm performance. (4) AHRS is positively influenced on performance of both state-owned enterprises (SOEs), and private owned enterprises (POEs). RHRS is negatively affect performance of SOEs. It can be concluded that both absolute and relative HR slacks lead to increase the firm performance up to a certain level, thereafter, firm performance is declined (Curvilinear relationship). The paper is original in its contribution to the organizational slack–firm performance literature by examining the relevance of absolute and relative HR slacks as indispensable sources.