| Jeopardizing Strategic Assets: Examining the Impact of Downsizing Through the Resource-Based View |
| | Norman, Patricia M. | Baylor U. | Patricia_Norman@Baylor.edu | (254) 710-6196 |
| | Ranft, Annette L. | West Virginia U. | aranft@wvu.edu | (304) 594-3072 |
| | The resource-based view suggests that intangible resources, such as knowledge and capabilities residing in human assets, create
advantage. When organizations downsize, employees who leave the firm may take individual tacit knowledge that is difficult to replace. In
addition, downsizing changes the social structure of an organization and can disrupt complex, embedded routines that may contribute to a
source of competitive advantage.
We argue, therefore, that a firm's resource attributes impact the performance effect of downsizing actions. We measure a firm's resource
attributes using human asset intensity of its primary industry, Tobin's q as a proxy for a firm's intangible resources, and capital asset intensity.
Using a sample of 191 firms that announced layoffs during 1990-1993, we empirically test our assertion that intangible assets, particularly
those that are based on human resources, are negatively affected by downsizing. Our results show that the immediate performance impact
to downsizing firms that rely heavily on intangible assets, and those in industries with high human asset intensity, is actually more positive
than for other firms. In later years, however, the negative performance impact on firms with greater intangible assets and in highly human
asset intensive industries becomes evident. This finding supports our explanation of the detrimental effects of downsizing based on the
resource-based view and suggests that the effects may not show up immediately and are likely to be more long term in nature. |
| | Keywords: downsizing; layoffs; resource-based view |
| Downscoping vs. Downscaling Spin-offs: Parent, Subsidiary and Proforma Performance |
| | Desai, Hemang | Southern Methodist U. | hdesai@mail.cox.smu.edu | (214)-768-3185 |
| | Nixon, Robert D. | Tulane U. | robert.nixon@tulane.edu | (504)-865-5439 |
| | Wiggins, Robert R. | Tulane U. | robert.wiggins@tulane.edu | (504)-865-5423 |
| | In the diversification literature, the area of downscaling and/or downscoping restructuring strategies has been the subject of considerable
research. While several empirical studies in this area have focused on spin-offs, most of these studies have concentrated on the performance
of the divesting company, with little research addressing the performance of the divested unit. This study examined the performance of both
the parent and the subsidiary firms, as well as a combined proforma performance, where the firms were involved in tax-free, equity spin-offs.
Results suggest that when the spin-off occasioned a reduction in scope for the parent firm, both the parent firm and the spin-off subsidiary
firm achieved performance improvements. However, when the spin-off only resulted in a reduction in scale for the parent firm, neither the firm
nor the subsidiary achieved such improvements. A combined pro forma analysis also demonstrated that, when spin-offs are separated from
parent firms, downscoping firms achieved better overall performance than downscaling firms. These results are only found when using an
industry-adjusting matching-firm methodology that controls for trends in financial accounting performance data. |
| | Keywords: restructuring; downscoping; performance |
| Scale Economies and Survival in a Growth Industry |
| | Makadok, Richard | Emory U. | Rich_Makadok@emory.bus.edu | (404)-727-8639 |
| | Walker, Gordon | Southern Methodist U. | gwalker@mail.cox.smu.edu | (214)-768-2191 |
| | In this paper we test the proposition that organization -specific capabilities reduce the risk of failure. This argument is central to many recent theoretical papers on organizational viability and performance, yet it has never been tested directly. To measure capabilities, we focus on what we cal scale-based efficiency, drawing from evolutionary economics. The industry examined is the money market mutual fund industry over its history from 1975 to 1994, and the unit of analysis is the fund family. This industry allows us to measure firm-specific scale-based efficiency in conjunction with a host of control variables that have been found to be significant in studies of organizational failure. Our results show a significant effect of firm-level efficiency, as a time-varying competence, on the risk of failure. We also show that this capability varies significantly across firms with their size and age. |
| | Keywords: Firm Capabilites; Economies of Scale; Survival |
| The Disaggregation of the Firm: An Empirical Test of the Impact of Technological Change and Globalization on Organizational Form |
| | Schilling, Melissa A. | Boston U. | melissa1@bu.edu | (617)-353-2657 |
| | Vasco, Cassandra | Boston U. | cvasco@bu.edu | (301)-482-0744 |
| | Sy, Wilvy F. | Boston U. | wsy@bu.edu | (632)-817-5205 |
| | In the past two decades we have witnessed a dramatic transformation in the nature of many firms. Large, hierarchical entities are being broken down into "loosely coupled" networks of organizational actors. These modular organizational systems may be flexibly recombined into a number of different configurations, enabling firms to rapidly alter both function and scale. Previous research posits that this transformation is a result of the increasing pace of technological change and the increasing globalization of markets.
In this study, we empirically assess the relationship between the rate of technological change, degree of globalization, and the use of contract manufacturing, and alternative work arrangements in 457 manufacturing industries. We find that technological change and globalization are significantly related to the use of contract manufacturing and alternative work arrangements, but not always in the directions hypothesized. Specifically, the rate of technological change was positively related to the use of contract agency workers, but negatively related to the use of contract manufacturing and on-call workers. The globalization results were reversed-globalization was negatively related to the use of contract agency workers, but positively related to the use of contract manufacturing and on-call workers.
Some of the major implications of this research are a) the rate of technological change and degree of globalization significantly impact the choice of organizational configuration, b) different types of alternative work arrangements may yield different types of flexibility (e.g., cost versus capability flexibility) and will be suitable under different industry conditions.
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| | Keywords: Technology; Globalization; Modularity |
| Determinants of Firm Turnaround: A Longitudinal Study of Decline Situation and Organizational Characteristics |
| | Francis, John D. | Mississippi College | Francis@mc.edu | (601)-925-3416 |
| | Desai, Ashay B. | U. of Wisconsin, Oshkosh | desai@uwosh.edu | (920)-424-7269 |
| | Pett, Timothy L. | Wichita State U. | pett@twsuvm.uc.twsu.edu | (316) 978-7114 |
| | In this paper, we focus on firm turnaround to provide insight into various factors that can be used to
successfully predict whether or not a declining firm will recover. Four categories of variables including
environmental munificence, urgency of decline, firm characteristics and firm retrenchment strategies
are tested for their ability to classify turnaround outcomes in 97 firms. Fisher's Linear Discriminant
Analysis (FLDA) is used to assess the ability of the relevant variables to discriminate between the
two turnaround outcomes. The results indicate that a firm's productivity, the availability of slack
resources, and its retrenchment activities can be used to accurately predict its ability to turnaround.
These findings indicate some important steps for researchers and practitioners in the search for
effective responses to decline. |
| | Keywords: Decline; turnaround; Longitudinal |