The Role of Coercive,Normative and Mimetic Pressures in Shaping Financial Slack: A Cross-National Study

Abstract

While organizational slack has traditionally been conceptualized as a product of internal dynamics, we argue that external institutional pressures (coercive, normative and mimetic) also shape the level of financial buffers firms have by altering the risk perception. Drawing on a panel of 24,856 firm-year observations covering 5,283 firms across 37 countries over 2014–2024, we find that all three institutional pressures significantly influence slack levels, with mimetic and normative forces exerting stronger effects than national coercive pressures. Firms in uncertainty-averse societies maintain higher slack levels to align with cultural expectations of prudence, as managers assess deviation from these expectations as risky. Many also emulate the slack management practices of industry leaders, since imitation lowers the perceived risks of pursuing novel strategies. Coercive pressures matter most in contexts where improvements in regulatory quality enhance predictability, shaping managerial interpretations of uncertainty in ways that make calculated risk-taking more acceptable. To reinforce our findings, we implement robust analyses, including difference-in-differences designs, instrumental variable estimation and geographic-temporal modeling of mimetic diffusion. As a result, this work reframes organizational slack management as a context-sensitive process, shaped by cultural norms, peer behavior, and regulatory conditions that operate simultaneously at national, industry and organizational levels.