Measuring organizational slack and an application of the slack construct to the prediction of merger and acquisition.

This study explores answers to the question of why firms adopt certain merger strategies. Organizational slack is proposed as an antecedent condition that has explanatory value in determining whether a firm will engage in merger as an external diversification strategy. In addition, three components of slack are posited as explaining whether the merger will be related or unrelated. Available slack, or the slack that is not involved in the design of the organization is posited as being associated with unrelated merger. Related slack, or resources that are part of the design of the organization, is hypothesized to explain related mergers. Potential slack, or the capital market perceptions of the firm, is thought to explain unrelated mergers.