Employee layoff under different modes of restructuring: exit, downsizing or relocation
Publication type
Journal article with impact factorPublication Year
2007Journal
Industrial and Corporate ChangePublication Volume
16Publication Issue
2Publication Begin page
161Publication End page
182
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Show full item recordAbstract
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.Knowledge Domain/Industry
Strategyae974a485f413a2113503eed53cd6c53
10.1093/icc/dtm002