The effect of downsizing on innovation outputs: The role of resource slack and constraints

Although the practice of downsizing is prevalent, its effects on organisational outcomes remain poorly understood. This article examines how and when downsizing affects organisational innovation. Using a unique data set of UK firms over a period of 22 years, we test the effect of downsizing on innovation outputs by considering the moderating role of resource slack and constraints. We argue and empirically demonstrate that downsizing has a dual effect on innovation, contingent on the firm’s level of resources. Our results reveal that downsizing affects innovation outputs positively in firms experiencing resource slack and negatively in firms experiencing resource constraints. We also show that the effect is more immediate in resource-constrained firms. Theoretical and managerial implications of these results are discussed

Dilemmas Of Downsizing During the Great Recession: Crisis Strategies of European Employers

Summary The present paper analyzes the choices faced by European employers when threatened with the prospect of the mass lay-off of their employees as a result of the Great Recession. By means of a representative survey among employers in Italy, Germany, Denmark, Poland, the Netherlands and Sweden in 2009, we show that employers mainly prefer to tackle such threats by offering short-time work, and by early retirement packages to older workers, in conjunction with buy-outs. The latter preference is particularly visible in countries where employers perceive the level of employment protection to be high. The only notable exception is Denmark, where employers prefer to reduce working hours. In general, a sense of generational fairness influences downsizing preferences, with those employers who favor younger workers particularly likely to use early retirement and buy-outs when downsizing, followed by working time reductions. Wage reductions and administrative dismissal are less favored by European employers. In particular, CEOs and owners are more inclined than lower-level managers to cut wages