IDEAS home Printed from https://ideas.repec.org/a/bla/jomstd/v47y2010i3p483-508.html
   My bibliography  Save this article

A Study of the Association between Level of Slack Reduction Following Downsizing and Innovation Output

Author

Listed:
  • Kamel Mellahi
  • Adrian Wilkinson

Abstract

Over the years scholars put forward a number of theories to explain the association between slack and innovation. This study extends this body of research by focusing on the effects of reduction in slack level following downsizing on innovation output. We developed two hypotheses to examine the total effects and varied yearly effects. We tested the hypotheses with data from a panel of UK firms that downsized between 1997 and 2003. The results show that the level of downsizing has only temporary effects on innovation output. We discuss the implications of these findings and avenues for future research.

Suggested Citation

  • Kamel Mellahi & Adrian Wilkinson, 2010. "A Study of the Association between Level of Slack Reduction Following Downsizing and Innovation Output," Journal of Management Studies, Wiley Blackwell, vol. 47(3), pages 483-508, May.
    • Handle: RePEc:bla:jomstd:v:47:y:2010:i:3:p:483-508
    DOI: 10.1111/j.1467-6486.2009.00872.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-6486.2009.00872.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-6486.2009.00872.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hall, Bronwyn H & Griliches, Zvi & Hausman, Jerry A, 1986. "Patents and R and D: Is There a Lag?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 265-283, June.
    2. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
    3. A. J. Dixon & H. R. Seddi, 1996. "An Analysis of R & D Activities in North East England Manufacturing Firms: The Results of a Sample Survey," Regional Studies, Taylor & Francis Journals, vol. 30(3), pages 287-294.
    4. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    5. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    6. Elena Cefis & Orietta Marsili, 2005. "A matter of life and death: innovation and firm survival," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(6), pages 1167-1192, December.
    7. Harvey Leibenstein, 1969. "Organizational or Frictional Equilibria, X-Efficiency, and the Rate of Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(4), pages 600-623.
    8. Carine Peeters & Bruno Pottelsberghe de la Potterie, 2007. "Innovation strategy and the patenting behavior of firms," Springer Books, in: Uwe Cantner & Franco Malerba (ed.), Innovation, Industrial Dynamics and Structural Transformation, pages 345-371, Springer.
    9. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    10. Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers 2001-29, Tel Aviv.
    11. Justin Tan & Mike W. Peng, 2003. "Organizational slack and firm performance during economic transitions: two studies from an emerging economy," Strategic Management Journal, Wiley Blackwell, vol. 24(13), pages 1249-1263, December.
    12. repec:fth:harver:1473 is not listed on IDEAS
    13. Zahra, Shaker A., 1995. "Corporate entrepreneurship and financial performance: The case of management leveraged buyouts," Journal of Business Venturing, Elsevier, vol. 10(3), pages 225-247, May.
    14. Ariél Pakes & Zvi Griliches, 1984. "Estimating Distributed Lags in Short Panels with an Application to the Specification of Depreciation Patterns and Capital Stock Constructs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(2), pages 243-262.
    15. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
    16. Atul Gupta & Leonard Rosenthal, 1991. "Ownership Structure, Leverage, and Firm Value: The Case of Leveraged Recapitalizations," Financial Management, Financial Management Association, vol. 20(3), Fall.
    17. Montalvo, Jose G, 1997. "GMM Estimation of Count-Panel-Data Models with Fixed Effects and Predetermined Instruments," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 82-89, January.
    18. Deborah Dougherty, 1992. "Interpretive Barriers to Successful Product Innovation in Large Firms," Organization Science, INFORMS, vol. 3(2), pages 179-202, May.
    19. Robert M. Salomon & J. Myles Shaver, 2005. "Learning by Exporting: New Insights from Examining Firm Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 431-460, June.
    20. Neil M. Kay, 1979. "The Innovating Firm," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-03583-0, December.
    21. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    22. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    23. James P. Guthrie & Deepak K. Datta, 2008. "Dumb and Dumber: The Impact of Downsizing on Firm Performance as Moderated by Industry Conditions," Organization Science, INFORMS, vol. 19(1), pages 108-123, February.
    24. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January.
    25. Hicheon Kim & Heechun Kim & Peggy M. Lee, 2008. "Ownership Structure and the Relationship Between Financial Slack and R&D Investments: Evidence from Korean Firms," Organization Science, INFORMS, vol. 19(3), pages 404-418, June.
    26. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    27. Henrich R. Greve, 2003. "Investment and the behavioral theory of the firm: evidence from shipbuilding," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 12(5), pages 1051-1076, October.
    28. Mohr, Lawrence B., 1969. "Determinants of Innovation in Organizations," American Political Science Review, Cambridge University Press, vol. 63(1), pages 111-126, March.
    29. Gideon D. Markman & Donald S. Siegel & Mike Wright, 2008. "Research and Technology Commercialization," Journal of Management Studies, Wiley Blackwell, vol. 45(8), pages 1401-1423, December.
    30. Meyer, Klaus E., 2002. "Management challenges in privatization acquisitions in transition economies," Journal of World Business, Elsevier, vol. 37(4), pages 266-276, January.
    31. Basberg, Bjorn L., 1987. "Patents and the measurement of technological change: A survey of the literature," Research Policy, Elsevier, vol. 16(2-4), pages 131-141, August.
    32. Robert E. Hoskisson & Michael A. Hitt, 1988. "Strategic control systems and relative r&d investment in large multiproduct firms," Strategic Management Journal, Wiley Blackwell, vol. 9(6), pages 605-621, November.
    33. Denis, David J & Denis, Diane K & Sarin, Atulya, 1997. "Agency Problems, Equity Ownership, and Corporate Diversification," Journal of Finance, American Finance Association, vol. 52(1), pages 135-160, March.
    34. Subramanian, A. & Nilakanta, S., 1996. "Organizational innovativeness: Exploring the relationship between organizational determinants of innovation, types of innovations, and measures of organizational performance," Omega, Elsevier, vol. 24(6), pages 631-647, December.
    35. Mark Van Osnabrugge, 2000. "A comparison of business angel and venture capitalist investment procedures: An agency theory-based analysis," Venture Capital, Taylor & Francis Journals, vol. 2(2), pages 91-109, April.
    36. Comanor, William S & Scherer, Frederic M, 1969. "Patent Statistics as a Measure of Technical Change," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 392-398, May/June.
    37. Deborah Dougherty & Trudy Heller, 1994. "The Illegitimacy of Successful Product Innovation in Established Firms," Organization Science, INFORMS, vol. 5(2), pages 200-218, May.
    38. Paul Bishop & Nick Wiseman, 1999. "External ownership and innovation in the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 31(4), pages 443-450.
    39. William P. Wan & Daphne W. Yiu, 2009. "From crisis to opportunity: environmental jolt, corporate acquisitions, and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 30(7), pages 791-801, July.
    40. Carine Peeters & Bruno Van Pottelsberghe, 2006. "Complex innovation strategies and patenting behaviour," ULB Institutional Repository 2013/9051, ULB -- Universite Libre de Bruxelles.
    41. Wright, Mike & Thompson, Steve & Robbie, Ken, 1992. "Venture capital and management-led, leveraged buy-outs: A European perspective," Journal of Business Venturing, Elsevier, vol. 7(1), pages 47-71, January.
    42. Thomas Keil & Erkko Autio & Gerard George, 2008. "Corporate Venture Capital, Disembodied Experimentation and Capability Development," Journal of Management Studies, Wiley Blackwell, vol. 45(8), pages 1475-1505, December.
    43. Richard Blundell & Rachel Griffith & John van Reenen, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 529-554.
    44. Cefis, Elena, 2003. "Is there persistence in innovative activities?," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 489-515, April.
    45. repec:bla:kyklos:v:42:y:1989:i:2:p:171-80 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Doukas, John A. & McKnight, Phillip J. & Pantzalis, Christos, 2005. "Security analysis, agency costs, and UK firm characteristics," International Review of Financial Analysis, Elsevier, vol. 14(5), pages 493-507.
    2. Rentocchini, Francesco, 2011. "Sources and characteristics of software patents in the European Union: Some empirical considerations," Information Economics and Policy, Elsevier, vol. 23(1), pages 141-157, March.
    3. Oesterle, Michael-Jörg & Richta, Hannah Noriko & Fisch, Jan Hendrik, 2013. "The influence of ownership structure on internationalization," International Business Review, Elsevier, vol. 22(1), pages 187-201.
    4. Zhu, JianJun (John) & Tse, Caleb H. & Li, Xu, 2019. "Unfolding China’s state-owned corporate empires and mitigating agency hazards: Effects of foreign investments and innovativeness," Journal of World Business, Elsevier, vol. 54(3), pages 191-212.
    5. Raquel Ortega-Argilés & Rosina Moreno & Jordi Caralt, 2005. "Ownership structure and innovation: is there a real link?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 39(4), pages 637-662, December.
    6. Boumediene Ramdani & Cherif Guermat & Kamel Mellahi, 2021. "The effect of downsizing on innovation outputs: The role of resource slack and constraints," Australian Journal of Management, Australian School of Business, vol. 46(2), pages 346-365, May.
    7. Chen, Chiung-Jung & Yu, Chwo-Ming Joseph, 2012. "Managerial ownership, diversification, and firm performance: Evidence from an emerging market," International Business Review, Elsevier, vol. 21(3), pages 518-534.
    8. Kim, Young Sang & Mathur, Ike, 2008. "The impact of geographic diversification on firm performance," International Review of Financial Analysis, Elsevier, vol. 17(4), pages 747-766, September.
    9. Ferris, Stephen P. & Sen, Nilanjan & Lim, Chee Yeow & Yeo, Gillian H. H., 2002. "Corporate focus versus diversification: the role of growth opportunities and cashflow," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(3), pages 231-252, July.
    10. Zinnia Mitra Bose & Indrani Chakraborty, 2022. "Effects of diversification on firm performance: an analysis of Indian firms," Indian Economic Review, Springer, vol. 57(2), pages 469-511, December.
    11. de Rassenfosse, Gaétan & Schoen, Anja & Wastyn, Annelies, 2014. "Selection bias in innovation studies: A simple test," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 287-299.
    12. Ole‐Kristian Hope & Wayne B. Thomas, 2008. "Managerial Empire Building and Firm Disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 591-626, June.
    13. Ciprian Stan & Mike Peng & Garry Bruton, 2014. "Slack and the performance of state-owned enterprises," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 473-495, June.
    14. Sharon Belenzon & Tomer Berkovitz, 2010. "Innovation in Business Groups," Management Science, INFORMS, vol. 56(3), pages 519-535, March.
    15. Blazsek, Szabolcs & Escribano, Alvaro, 2010. "Knowledge spillovers in US patents: A dynamic patent intensity model with secret common innovation factors," Journal of Econometrics, Elsevier, vol. 159(1), pages 14-32, November.
    16. Choi, Mincheol & Lee, Chang-Yang, 2021. "Technological diversification and R&D productivity: The moderating effects of knowledge spillovers and core-technology competence," Technovation, Elsevier, vol. 104(C).
    17. Nicolas van Zeebroeck & Bruno van Pottelsberghe de la Potterie, 2011. "Filing strategies and patent value," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(6), pages 539-561, February.
    18. Manel Gharbi & Anis Jarboui, 2017. "Institutional investors’ role in diversifying orientation decision across Tunisian companies," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1244873-124, January.
    19. Yoshitsugu Kitazawa, 2012. "An improved theoretical ground for the linear feedback model and a new indicator," Discussion Papers 58, Kyushu Sangyo University, Faculty of Economics.
    20. Deng, Saiying (Esther) & Elyasiani, Elyas & Mao, Connie X., 2007. "Diversification and the cost of debt of bank holding companies," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2453-2473, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jomstd:v:47:y:2010:i:3:p:483-508. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.