Employee layoff under different modes of restructuring: exit, downsizing or relocation
Coucke, Kristien Pennings, Enrico Sleuwaegen, Leo
Coucke, Kristien
Pennings, Enrico
Sleuwaegen, Leo
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2007
Journal
Industrial and Corporate Change
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Publication Volume
16
Publication Issue
2
Publication Begin page
161
Publication End page
182
Publication NUmber of pages
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Abstract
Pressured by globalizing economies and growing international competition, an increasing number of firms are forced to rationalize productive operations. Especially poorly performing firms need to improve their profitability through downsizing or relocating their operations, which in many cases causes collective employee layoffs. This article adds to the emergent literature on the consequences of downsizing by looking into the determinants of collective employee layoffs. Based on a unique sample of Belgian firms reporting collective layoffs this article analyzes the firm's decision to dismiss all employees (exit), a significant proportion of its employees without creating new employment elsewhere (downsizing), or to move production abroad (international relocation). We theoretically derive the conditions under which a firm prefers one strategy to another. The empirical results confirm that relocating firms are most profitable among the restructuring firms, have invested more in the recent past, operate in sectors with significant economies of scale and belong more often to a multinational group than firms opting for downsizing or exit. Downsizing firms are more capital intensive than relocating firms, while exiting firms are less profitable, smaller, younger, and more labor intensive than downsizing or relocating firms.
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Keywords
Strategic Context & International Business