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

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 to 2019 financial data for firms across six tourism sectors in a developed economy, the United States. 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.

Automated summary

This study examines the influence of political risk on firm-level performance and failure in the tourism industry in the United States, highlighting the role of organizational slack. The results support the moderating effects of absorbed and unabsorbed slack on the relationship between risk, performance, and business failure, providing insights for tourism firms to enhance business sustainability and resilience in the face of challenges like the COVID-19 pandemic.