Policy brief: Labour flexibility and firm innovativeness
Firms increasingly engage in downsizing their labour force with a view to increasing their efficiency and cutting costs
Abstract
Firms increasingly engage in downsizing their labour force with a view to increase their efficiency and to cut costs. However, recent research in developed countries found that downsizing firms do not always enjoy the desired increase but rather frequently experience a decrease in organizational performance, efficiency and profitability: Downsizing is frequently associated with increased feelings of job insecurity among the remaining employees, resulting in lower levels of motivation and commitment and ultimately a decrease in innovative behaviors and performance. Given the frequent use of downsizing, the importance of innovation for firm competitiveness and the negative impact of the former on the latter, researchers and practitioners alike are intrigued by the question how firms can remain innovative despite undergoing downsizing.
Citation
Tilburg University (2017) Policy brief: Labour flexibility and firm innovativeness
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