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Slack Time and Innovation

45 Pages Posted: 27 Apr 2015 Last revised: 31 Oct 2017

Ajay Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Christian Catalini

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Avi Goldfarb

University of Toronto - Rotman School of Management

Hong Luo

Harvard Business School - Strategy Unit

Multiple version iconThere are 2 versions of this paper

Date Written: August 23, 2017

Abstract

The relationship between slack resources and innovation is complex, with the literature linking slack to both breakthrough innovations and resource misallocation. We reconcile these conflicting views by focusing on a novel mechanism: the role slack time plays in the endogenous allocation of time and effort to innovative projects. We develop a theoretical model that distinguishes between periods of high (work weeks) versus low (break weeks) opportunity cost of time. Low-opportunity cost time during breaks weeks may induce: 1) lower quality ideas to be developed (a selection effect); 2) more effort to be applied for any given idea quality (an effort effect); and 3) an increase in the use of teams because scheduling is less constrained (a coordination effect). As a result, the effect of an increase in slack time on innovative outcomes is ambiguous because the selection effect may induce more low quality ideas, whereas the effort and coordination effect may lead to more high quality, complex ideas. We test this framework using data on college breaks and on 165,410 Kickstarter projects across the US. Consistent with the predictions, during university breaks more projects are posted in the focal regions, and the increase is largest for projects of either very high or very low quality. Furthermore, projects posted during breaks are more complex, and involve larger teams with diverse skills. We discuss implications for the design of policies on slack time.

Keywords: crowdfunding, entrepreneurship, slack time, low-opportunity cost time, teamwork, internet

JEL Classification: L26, O31, J22

Suggested Citation

Agrawal, Ajay and Catalini, Christian and Goldfarb, Avi and Luo, Hong, Slack Time and Innovation (August 23, 2017). Rotman School of Management Working Paper No. 2599004; MIT Sloan Research Paper Forthcoming. Available at SSRN: https://ssrn.com/abstract=2599004 or http://dx.doi.org/10.2139/ssrn.2599004

Ajay Agrawal

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christian Catalini (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-480
Cambridge, MA MA 02142
United States

HOME PAGE: http://mitsloan.mit.edu/faculty-and-research/faculty-directory/detail/?id=58777

Avi Goldfarb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)

Hong Luo

Harvard Business School - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

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