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The Mean and Lean Firm and Downsizing: Causes of Involuntary and Voluntary Downsizing Strategies

Published on Jun 1, 2002in Sociological Forum1.78
· DOI :10.1023/A:1016093330881
Art Budros4
Estimated H-index: 4
(McMaster University)
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Abstract
Despite the longevity and pervasiveness of downsizing, our knowledge about this practice is inadequate for at least two reasons. One involves underanalysis of the historical context in which downsizing has evolved and the other involves the tendency to equate downsizings with layoffs even though layoffs represent only one of numerous downsizing strategies. I address the one inadequacy by identifying two institutional factors—the spread of economic competition and shareholder activism—that have motivated large firms to embrace the “lean and mean” conception of control and thus to implement downsizings. I address the other inadequacy by distinguishing between involuntary and voluntary downsizings and by testing the ability of a theory of downsizing strategies to explain these two kinds of downsizing among Fortune 100 firms from 1979 to 1995. The findings support the theory: Involuntary downsizings occur when firms face economic pressures and when social processes define these acts as natural; voluntary downsizings occur when firms are shielded from economic pressures and when there is a social preference for these acts. There also is support for the hypothesis that the effects of economic factors on downsizings should decrease over time while those of institutional ones should increase. Finally, I emphasize the role that analyses of institutional contexts, conceptions of the firm, and corporate strategies and structures can play in advancing our understanding of the powerful large firm in America.
  • References (66)
  • Citations (55)
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References66
Newest
Published on Jan 1, 2007
Jack P. Friedman1
Estimated H-index: 1
Published on Jan 1, 2007in Harvard Business Review5.69
Robert H. Hayes1
Estimated H-index: 1
,
William J. Abernathy1
Estimated H-index: 1
Unlike European and Japanese managers, American managers have sometimes avoided the hard, make-or-break decisions concerning technological competitiveness. Examining how this shortsighted neglect contributed to U.S. economic decline several decades ago offers useful lessons for today's companies.
Published on Jun 1, 2000in Sociological Forum1.78
Art Budros4
Estimated H-index: 4
(McMaster University)
Given the importance of innovation to organizations and to society-at-large, scholars have asked: Why do organizations innovate? Institutionalists argue that the causes of innovation vary by organizational type: While technicoeconomic forces should trigger innovation among “efficiency-minded” organizations, social and cultural forces should spur innovation among “institutionalized” organizations. Building on this argument, I specify two organizational orientations—efficiency and institutional—an...
Published on Jan 1, 2000in Academy of Management Review10.63
William McKinley22
Estimated H-index: 22
(SIU: Southern Illinois University Carbondale),
Jun Zhao2
Estimated H-index: 2
(Governors State University),
Kathleen G. Rust8
Estimated H-index: 8
(Elmhurst College)
To better understand the phenomenon of organizational downsizing, we compare three theoretical perspectives on downsizing: the economic, the institutional, and the sociocognitive. We use the three perspectives to organize the growing empirical literature on downsizing, and we link streams of empirical work to the theoretical perspective that underlies each. With our sociocognitive model, we argue that downsizing has become institutionalized through the collectivization and reification of a “down...
Published on Sep 1, 1999in Administrative Science Quarterly8.02
William Ocasio24
Estimated H-index: 24
(NU: Northwestern University),
Hyosun Kim1
Estimated H-index: 1
(MIT: Massachusetts Institute of Technology)
We develop a conceptual model of the circulation of corporate control—the instability in formal authority at the top of large corporations. According to our model, chief executive officer (CEO) selection is both a political contest for the top executive position and an ideological struggle among members of the firm's political coalition over defining the corporate agenda and strategy. We apply the model to analyze the selection of functional backgrounds of 275 new CEOs in large U.S. manufacturin...
Published on Mar 1, 1999
William McKinley22
Estimated H-index: 22
,
Allen G. Schick5
Estimated H-index: 5
+ 1 AuthorsAlex P. Tang1
Estimated H-index: 1
This study examines the financial environment of layoffs in large corporations, a topic that has received limited empirical attention. Based on the diverse, sometimes inconsistent arguments in previous layoff and downsizing literature, we formulate four research questions about firm financial performance in the years preceding and following layoffs. We then answer those questions with data from a study of 210 layoff announcements and associated firm financial performance trends. The results sugg...
Published on Jan 1, 1999in Social Science Quarterly1.20
Harland Prechel11
Estimated H-index: 11
,
John Boies3
Estimated H-index: 3
,
Tim Woods2
Estimated H-index: 2
Despite the rapid increase in corporate debt and prevalence of mergers and acquisitions, researchers have not examined whether these changes have affected corporate form change. The purpose of this research is to examine causes of change from the multidivisional (MDF) to the multilayered subsidiary form (MLSF). The MLSF is a corporation with a hierarchy of two or more levels of subsidiary corporations with a parent company at the top of the hierarchy operating as a management company. Using logi...
Published on Oct 1, 1998in Strategic Management Journal5.57
K.C. O'Shaughnessy5
Estimated H-index: 5
(WMU: Western Michigan University),
David J. Flanagan8
Estimated H-index: 8
(WMU: Western Michigan University)
It is often argued that mergers and acquisitions (M&As) lead to employee layoffs. This paper examines factors that influence the probability that a layoff announcement will follow an M&A. A sample of 136 large M&As, involving U.S. targets, that occurred between 1989 and 1993 is analyzed. Analyses of this sample indicate that the probability of a layoff announcement is higher if the firms involved in the transaction are related. The probability that a layoff will be announced was not changed when...
Published on Sep 1, 1998in Journal of Management Inquiry1.99
William McKinley22
Estimated H-index: 22
(SIU: Southern Illinois University Carbondale),
Mark A. Mone17
Estimated H-index: 17
(UWM: University of Wisconsin–Milwaukee),
Vincent L. Barker18
Estimated H-index: 18
(UWM: University of Wisconsin–Milwaukee)
This article explores the ideological foundations of organizational downsizing in the 1990s and focuses on the ideology of employee self-reliance and the ideology of debureaucratization. We document these two managerial ideologies by examining business press articles and popular management literature in which they are being promulgated. Based on past organizational research that has traced the effects of ideologies on organizations, we argue that these two ideologies increase the likelihood of d...
Published on Jun 1, 1998in Sociological Forum1.78
Harland Prechel11
Estimated H-index: 11
(A&M: Texas A&M University),
John L. Boies1
Estimated H-index: 1
(A&M: Texas A&M University)
Students of the modem corporation continue to assume that corporations have the same form as they did before the turbulent 1980s when the economy became increasingly globalized and competitive. Our analysis shows that corporations are changing from the multidivisional form to a multilayered subsidiary form. Previous research showed that most corporations were multidivisional in the late 1970s. However, by 1993, 42% of the largest 100 industrial corporations had one or no divisions. The mean numb...
Cited By55
Newest
Published on Mar 1, 2019in Personnel Psychology6.93
F. Scott Bentley (Binghamton University), F. Scott Bentley (Binghamton University)+ 0 AuthorsRebecca R. Kehoe6
Estimated H-index: 6
(RU: Rutgers University)
José David Vicente Lorente5
Estimated H-index: 5
(University of Salamanca),
José Angel Zúñiga Vicente8
Estimated H-index: 8
(URJC: King Juan Carlos University)
AbstractThis study explores an empirically untested issue: the relationship between the level of a firm’s R&D intensity and employee downsizing. Basing our conceptual development on the Resource-Based View of the firm, we argue that a linear relationship is a poor approximation of the proposed relationship. Instead, we find theoretical insights supporting the logic that employee downsizing decreases as firms shift from low to moderate levels of R&D intensity but increases as firms change from mo...
This article investigates the undertaking of corporate restructuring practices (employee downsizing and wage moderation) in Germany from 2008 to 2015. The article presents a political perspective that draws on the insights of the power resources approach and of institutional analyses. The theoretical framework highlights how institutional arrangements structure power relations within companies by empowering, in an asymmetrical manner, different categories of firm stakeholders (employees, manager...
Published on Jul 1, 2017in Information Processing and Management3.89
Youngseek Kim8
Estimated H-index: 8
(UK: University of Kentucky)
The purpose of this study is to examine how institutional pressures, individual motivations, and resources all affect scientists diverse data sharing behaviors, including (a) making data accessible through data repositories, (b) submitting data as journal supplements, and (c) providing data via personal communication methods upon request. A combined theoretical framework integrating institutional theory and theory of planned behavior was used to create a research model which presents how scienti...
Published on May 27, 2017in Journal of Critical Realism
ABSTRACTHow do researchers explain religion’s durability in Costa Rica and intense secularization in Uruguay in spite of parallel historical developments? This article seeks to explain why current theories of secularization and religious stability are inadequate to explain this outcome due to the limits of positivistic assumptions and methodological individualism. Archer’s morphogenetic approach provides a better model because it avoids conflation by emphasizing emergence and analytic dualism be...
Published on Dec 15, 2016
Krzysztof Cybulski1
Estimated H-index: 1
(University of Warsaw)
ABSTRACTThis study examines whether the reduction of the number of employees has actually been efficient in the restructuring undertaken in the European banking sector, focusing on the case of Spain but providing insight into restructuring and downsizing issues similar in other southern countries in Europe. In Spain, the concentration process has been more intense because of the financial crisis. For this purpose, the evolution of the number of employees in the subsector of the listed banks was ...
Published on Aug 1, 2016in Organization Science3.26
Ken-Hou Lin10
Estimated H-index: 10
This article sheds light on the ongoing employment stagnation in the United States by investigating the links between the rise of finance and firm employment dynamics during the 1982–2005 period. I argue that the rise of finance marginalized the role of labor in revenue generating and sharing processes, which led to employment stagnation among the largest nonfinancial firms in the United States. Evidence suggests that increasing investment in financial assets depresses the workforce size. The gr...
Dong Kwan Jung2
Estimated H-index: 2
,
Ruth V. Aguilera34
Estimated H-index: 34
(NU: Northeastern University),
Michel Goyer4
Estimated H-index: 4
(University of Birmingham)
In this article, we illustrate how the interaction between institutional arrangements and the presence of different categories of firm stakeholders with specific preferences provides important insights to understand the conditions under which corporate restructuring practices are introduced. Institutions shape the range of actors' strategic options and mediate the translation of the preferences of firm stakeholders into corporate policies. Nonetheless, strategic choice remains possible since fir...
Published on Jun 1, 2015in Social Forces2.29
Jin Wook Jung1
Estimated H-index: 1
(NUS: National University of Singapore)
This paper develops a theoretical account of the reconstruction of workforce downsizing as a shareholder-value strategy since the 1980s. This account has two components. First, building on resource-dependence theory, I suggest that growing corporate dependence on institutional investors makes firms susceptible to their demand for greater returns, especially when these institutional investors are blockholders and resistant to counter-pressure from managers. Second, building on Fligstein’s theory ...
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