Organizational Ecology, Slack Resource, and Organizational Failure: Empirical Evidence of Taiwanese Delisted Firms
Author
Abstract
The phenomenon of organizational failure has become more prevalent than ever as the global economy drastically fluctuated in the past decade. However, the issue of organizational failure has not received as much attention as that of organizational performance in the management literature. This study adopts the perspectives of organizational ecology and slack resource and investigates the influences of ecological factors and the characteristics of slack resources of the firms, as well as their interaction, on organizational failure. Using the data of 1,195 Taiwanese listed firms across 38 industries during the year of 2000-2008, this study examines the evidence of the delisted firms caused by financial crisis on both ecological level and firm level. Empirical results demonstrate a U-shaped curvilinear relationship between population age and density and the fatal rate of the industrial population. The firm-level evidence shows that the level of unabsorbed slack resource of a firm is negatively associated with the probability of delisting. While the absorbed slack resource does not directly decrease the probability of delisting, it significantly mitigates the impact of unfavorable ecological conditions on organizational survival. This study integrates the external perspective of ecology and the internal perspective of the resources of the firm, which distinguishes this current study from past literature. The findings of the study also bear important implications to both theory
and practice.
