WHEN DO SLACK RESOURCES IMPACT NEW VENTURE …

WHEN DO SLACK RESOURCES IMPACT NEW VENTURE SUCCESS?

By FARISS-TERRY MOUSA

A dissertation submitted in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY

WASHINGTON STATE UNIVERSITY College of Business MAY 2009

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To the Faculty of Washington State University: The members of the Committee appointed to examine the

dissertation/thesis of FARISS-TERRY MOUSA find it satisfactory and recommend that it be accepted.

___________________________________ Richard Reed, Ph.D., Chair

___________________________________ Jonathan D. Arthurs, Ph.D.

___________________________________ Min-Chiang Wang, Ph.D.

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AKNOWLEDGEMENTS I am grateful to Dr. Richard Reed for providing generous support and guidance throughout my PhD program and more specifically for guidance in this dissertation. I appreciate his advising and encouragement in this endeavor. Not only has he devoted time and energy to supervise my work, but also taught me to think critically. He continuously provided me with valuable input and the necessary feedback for my work to be thorough. I have the utmost respect for his integrity, professionalism, intellect, and work ethic. I am also grateful to my committee members: Dr. Jonathan Arthurs has helped make my early career in academia what it is. He has allowed me valuable opportunities to work and learn from him. Jonathan has also been a mentor, friend, teacher and colleague to me in a very generous way. I am very grateful to his endless support, patience, and guidance. Dr. Min-Chiang Wang also has been instrumental in my academic career. Min-Chiang spent time with me discussing statistical questions and issues. His kindness and helpfulness have guided my studies and challenged me in a positive way. I could have never asked for a better gift than to have the privilege to have worked with and been influenced by Richard Reed, Jonathan Arthurs, and Min-Chiang Wang. I thank for serving on my dissertation committee. Special thanks for the faculty, staff, and graduate students of the Department of Management and Operations at Washington State University for their endless support, friendship, and thoughtfulness.

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Last but not least, I would like to extend my appreciation for Dr. Craig Parks from the Department of Psychology at Washington State University for always answering any questions that I had with utmost enthusiasm and clarity throughout my PhD.

To all, I will always remember and appreciate your support.

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WHEN DO SLACK RESOURCES IMPACT NEW VENTURE SUCCESS?

by Fariss-Terry Mousa, Ph.D. Washington State University

May 2009

Chair: Richard Reed

Abstract A significant body of research exists on organizational slack in large publicly traded firms. Little work exists on the value of slack resources for younger firms. Using a unique sample of high-tech, initial public offerings (IPOs), this dissertation examines how slack resources affect the short- and long-term success of these firms. Financial and non-financial data are collected from IPO prospectuses. I argue and test the relationship using partial hierarchical regression analysis that firms that possess financial, innovational, and managerial slack resources provide a signal to potential investors regarding the quality of the IPO. The results provide evidence that slack resources increase IPO value and percent premium paid. I also estimate the semiparametric Cox Proportional Hazards model to test whether slack resources significantly impact the probability of post-IPO survival. I find that the probability of post-IPO survival increases with pre-IPO working capital and R&D-investment slack.

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