Downsizing - intellectual capital performance anorexia or enhancement?

• Published in: The learning organization Vol. 11; no. 4/5; pp. 368 - 379
• Main Author: Mitchell Williams, S
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Group Publishing Limited 01.08.2004; Emerald
• Subjects: Competition; Competitive advantage; Context Effect; Corporations; Dislocated Workers; Downsizing; Efficiency; Employees; Financial performance; Human Capital; Human resource management; Impact analysis; Information Systems; Intellectual capital; Intellectual Property; Job Layoff; Knowledge; Knowledge Management; Labor Force; Organizational Climate; Organizational Culture; Organizational Effectiveness; Productivity; Profits; Research Methodology; Social Capital; Social Networks; Studies; United States; Workforce; United States; United States > US; Intellectual capital; Downsizing; United States of America; Human resourcing
• ISSN: 0969-6474; 1758-7905
• DOI: 10.1108/09696470410538260

The objective of this paper is to investigate if downsizing contributes to, or impedes, a firm's intellectual capital performance (ICE) based on a longitudinal analysis of 56 United States publicly listed companies that significantly downsized their workforce during the mid-1990s. Empirical analysis indicates that for the majority of firms, ICE consistently declined annually for the first 3 years, following downsizing with a moderate increase in the fourth year. Findings provide several interesting insights and conclusions. Most importantly, downsizing appears to have a negative impact on a firm's ICE following the reduction in workforce number. The impact of downsizing appears to be more significant amongst IC resource rather than traditional (physical capital) based firms. It is recommended that corporate directors and managers seek alternative strategies to address poor performance and competitive results than immediately downsizing their workforce as such action affects ICE.