Downsizing Review and Synthesis

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Journal of Management Causes and Effects of Employee Downsizing: A Review and Synthesis Deepak K. Datta, James P. Guthrie, Dynah Basuil and Alankrita Pandey Journal of Management 2010 36: 281 DOI: 10.1177/0149206309346735 The online version of this article can be found at:

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Southern Management Association

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Causes and Effects of Employee Downsizing: A Review and Synthesis University of Texas, Arlington

Deepak K. Datta
University of Kansas

James P. Guthrie Dynah Basuil Alankrita Pandey

University of Texas, Arlington

As employee downsizing has become increasingly ubiquitous in recent years, the study of this phenomenon has assumed greater significance. This article develops an integrative framework that incorporates environmental and organizational antecedents as well as the implications of downsizing for individuals and organizations. Key empirical studies are reviewed and major patterns and contradictions are identified. The authors identify and discuss theoretical and methodological concerns related to the extant literature and provide recommendations for future research aimed at developing a better understanding of employee downsizing. Keywords: employee downsizing; layoffs; redundancy; review

The thing that people need to remember is that downsizing may be back on the front pages, but the downsizing never slowed down. Downsizing has been a constant and regular feature of the new working world, and it will continue to be. —Bruce Tulgan, founder and CEO of RainmakerThinking Corresponding author: Deepak K. Datta College of Business Department of Management University of Texas, Arlington Arlington, TX, USA 76019-0467 E-mail address: Journal of Management, Vol. 36 No. 1, January 2010 281-348 DOI: 10.1177/0149206309346735 © 2010 Southern Management Association. All rights reserved.

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Journal of Management / January 2010

Over the past couple of decades, employee downsizing has become an integral part of organizational life. Global competitive pressures coupled with ever-changing demand conditions have caused firms to critically examine their cost structures, including those associated with human resources. Once confined primarily to the United States, employee downsizing has, over time, become the norm in many countries. The magnitude of the downsizing activity has been exacerbated by the current recession. The extent of job losses has been staggering. In the United States alone, more than 6.5 million jobs have been “downsized” since the recession began in December 2007, with the numbers expected to grow in the foreseeable future (Krugman, 2009). In 2008, the U.S. Bureau of Labor Statistics recorded 21,137 “mass layoff events” in the United States involving more than 2 million job losses (Bureau of Labor Statistics, 2009).1 Other countries have witnessed their share of job reductions, including countries that have traditionally shunned the practice of employee downsizing. The past year has witnessed significant employee reductions in countries such as Japan, Hong Kong, South Korea, and Taiwan. Even the economic juggernaut of China has been affected, with major layoffs in a number of sectors (e.g., among export-oriented firms and labor-intensive small businesses in China’s coastal areas). Large-scale layoffs have also become commonplace in Europe, resulting in a spike in...
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