From Slack to Staff: Managers' Allocation of Slack Resources to Hiring

Abstract

Prior research views cash holdings, or high‐discretionary slack, as a buffer against shocks or a catalyst for strategic change. Drawing on stakeholder salience theory, we argue that cash can also reshape managers' interpretation and prioritization of employee hiring‐related claims, thereby increasing hiring, and that this effect is more pronounced when structural influences heighten the salience of those claims. Study 1, a large‐scale field study of Belgian firms, finds a positive but diminishing relationship between cash and hiring. This relationship strengthens under conditions of greater firm dependence on specific employee groups or following an exogenous legal reform, both of which are hypothesized to make the salience of specific employee groups more apparent. In Study 2, a vignette experiment offers causal support for the hypothesized mechanism, with employee salience cues strengthening how managers translate cash into hiring allocations. Combined, our findings contribute to research on slack resources and stakeholder salience by showing that managers use high‐discretionary cash not only for buffering or strategic change but also to respond to salient stakeholders.