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Does downsizing improve organizational performance? An analysis of Spanish manufacturing firms

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  • Muñoz-Bullón, Fernando
  • Sánchez-Bueno, María José

Abstract

The objective of this study is to examine the effect of downsizing on corporate performance, considering a sample of manufacturing firms drawn from the Spanish Survey of Business Strategies during the 1993- 2005 period. No significant differences in post-downsizing performance arise between companies which downsize and those that do not. Likewise, we find that substantial workforce reductions through collective dismissals do not either lead to improved performance levels. Downsizing, therefore, may not be a way for managers to increase performance, particularly in a context like the Spanish one, where the labour market is characterized by a high protection of employees’ rights and substantial contract termination costs.

Suggested Citation

  • Muñoz-Bullón, Fernando & Sánchez-Bueno, María José, 2008. "Does downsizing improve organizational performance? An analysis of Spanish manufacturing firms," DEE - Working Papers. Business Economics. WB wb083007, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
  • Handle: RePEc:cte:wbrepe:wb083007
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    References listed on IDEAS

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    1. Luis Toharia & Antonio Ojeda, 1999. "The Management of Redundancies in Europe: The Case of Spain," LABOUR, CEIS, vol. 13(1), pages 237-267, March.
    2. Arne L. Kalleberg, 2001. "Organizing Flexibility: The Flexible Firm in a New Century," British Journal of Industrial Relations, London School of Economics, vol. 39(4), pages 479-504, December.
    3. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    4. Chen, Peter & Mehrotra, Vikas & Sivakumar, Ranjini & Yu, Wayne W., 2001. "Layoffs, shareholders' wealth, and corporate performance," Journal of Empirical Finance, Elsevier, vol. 8(2), pages 171-199, May.
    5. Alejandro Requejo, 1996. "Reducción de plantilla y problemas de viabilidad financiera: el papel de la estructura de capital," Investigaciones Economicas, Fundación SEPI, vol. 20(1), pages 43-70, January.
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    More about this item

    Keywords

    Downsizing;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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