Environmental research has usually highlighted that the existence of slack resources in an organization helps allocate invest-
ment to innovative initiatives. However, the existing literature has paid very limited attention to how slack resources can
influence the effects of focused and diversified innovations in different ways. Agency theory scholars claim that a manager’s
first preference when confronted with discretionary resources will not generate positive investments for the firm, but their
own opportunistic preferences. The differences between focused and diversified environmental innovations allow us to gain
a better understanding of the financial impact of being focused and how slack resources matter in this context. We analyze a
longitudinal sample of 5845 environmental patents from the 75 largest companies in the electrical components and equipment
industry worldwide. Our results show that high levels of slack resources reduce the existing positive relationship between
focused environmental innovations and a firm’s financial performance. These results contribute to delineating the theoreti-
cal and empirical implications of focused versus diversified environ

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• Do Firms’ Slack Resources Influence the Relationship Between Focused Environmental Innovations and Financial Performance? More is Not Always Better