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

Author

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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)

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

Suggested Citation

  • 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.
    • Handle: RePEc:sae:ausman:v:46:y:2021:i:2:p:346-365
    DOI: 10.1177/0312896220970609
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    References listed on IDEAS

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    More about this item

    Keywords

    Constraints; downsizing; innovation; layoffs; patents; resource; slack;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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