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

Boumediene Ramdani, Cherif Guermat and Kamel Mellahi
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Boumediene Ramdani: Centre for Entrepreneurship, College of Business & Economics, Qatar University, Doha, Qatar
Cherif Guermat: Bristol Business School, University of the West of England, Bristol, UK
Kamel Mellahi: Centre for Responsible Business (CRB), Dubai Chamber of Commerce & Industry, Dubai, United Arab Emirates

Australian Journal of Management, 2021, vol. 46, issue 2, 346-365

Abstract: 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. JEL Classification: J63, L25, M51, O32

Keywords: Constraints; downsizing; innovation; layoffs; patents; resource; slack (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:46:y:2021:i:2:p:346-365

DOI: 10.1177/0312896220970609

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