Tourism Firms’ Vulnerability to Risk: The Role of Organizational Slack in Performance and Failure

CHEN ZHENG, Zezeng Li, Jialin Wu

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Abstract

This study explores the influence of political risk on firms in the tourism industry. It addresses a research gap regarding the impact of political risk on firm-level performance and failure, and uncovers the role of organizational slack in this relationship. Firm-level political risk is estimated from 2002–2019 financial data for firms across six tourism sectors in a developed economy, the USA. Such risk is found to be significantly associated with firm performance and business failure. From the perspectives of the resource-based view and the threat-rigidity hypothesis, the results support the moderating effects of absorbed and unabsorbed slack on links between risk, performance, and business failure. Given that the COVID-19 pandemic has highlighted the tourism industry’s vulnerability, this study will be of interest to tourism firms seeking to improve business sustainability and resilience.
Original languageEnglish
Pages (from-to)1-47
Number of pages47
JournalJournal of Travel Research
Publication statusAccepted/In press - 17 Mar 2021

Keywords

  • firm-level political risk
  • business failure
  • organizational slack
  • firm performance
  • tourism vulnerability

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