Downsizing in the German chemical manufacturing industry during the 1990s. Why is small beautiful?

The German chemical manufacturing industry experienced major downsizing between 1992 and 2004, with the average size of firms shrinking by nearly half during this period. This study uses modern frontier efficiency analysis to investigate the determinants of this downsizing. Based on reliable census data, the results of this analysis suggest that firms were not primarily concerned with improving technical efficiency, but with establishing an optimal scale of production. The proportion of scale-efficient firms has been persistently increasing, and downsizing is found to be a rational conduct because all scale-inefficient firms have continually operated under the decreasing returns portion of technology.     

Industrial Restructuring and Economic Growth

The last two decades have been a period of structural change in industrialised countries. The extent of this restructuring process has been different across countries and industries, though. In this paper we investigate the effect of lagging behind in the process of downsizing and deconcentration. We find empirical evidence of industries that experienced only little downsizing when compared internationally to experience less subsequent growth, on average. However, this effect is industry-dependent and its magnitude depends upon whether firm or establishment data are used. Technologically advanced industries are found to be particularly sensitive to (lack of) restructuring.     

Consumer Response to Package Downsizing: Evidence from the Chicago Ice Cream Market

It is common among producers of consumer packaged goods to reduce the volume of product per package such that the new size replaces the old one. This tactic is commonly referred to as package downsizing. In this article, we investigate the extent to which consumers have different sensitivities to package price and package size in order to shed light on the managerial implications of package downsizing. To do so, we estimate a random utility model of demand to measure consumer response to price and package size using household scanner panel data on bulk ice cream purchases in Chicago. The estimation framework involves modeling household heterogeneity, addressing price endogeneity and accounting for unbalanced choice alternatives. Our main finding is that consumers are less responsive to package size than to price; the demand elasticity with respect to package size is approximately one-fourth the magnitude of the demand elasticity with respect to price. This result implies that marketing managers can use downsizing as a hidden price increase in order to pass through increases in production costs, that is, cost of raw materials, and maintain, or increase, their profits.     

Socially responsible downsizing: Comparing family and non‐family firms

This study seeks to investigate whether family firms are more likely to downsize their workforce than their non‐family counterparts. Drawing on socioemotional wealth approach, we first explore the effect of family presence on workforce downsizing. Furthermore, we examine the moderating role of R&D activity on the family presence–downsizing relationship. Our sample covers a panel of manufacturing SMEs in Spain over the 1993–2014 period. We find that family firms are less likely to downsize than non‐family firms. Our results also reveal a negative association between R&D activity and workforce downsizing. Finally, the relationship between family presence and downsizing is contingent upon R&D activity, that is, family firms engaged in R&D activities are less likely to downsize than non‐innovative family firms.     

Returns to Scale in Small and Large U.S. Manufacturing Establishments: Further Evidence

Nguyen and Reznek (1991) used plant-level data for five 4-digit SIC industries to estimate and compare the degrees of returns-to-scale for establishments of various size classes for the years 1977 and 1982. They found that the estimated scale elasticities of all plant sizes have values approximately equal to one. They, therefore, concluded that both small and large establishments under study are equally efficient in production. The purpose of the present study is to extend and improve upon Nguyen and Reznek's work by (1) extending the data set to cover the entire U.S. manufacturing sector, (2) improving the model by including energy as a separate input in production, and (3) relaxing the assumption of homogeneity and estimating an unrestricted (non-homogeneous, non-homothetic) production model. With the improved model and data, it is found that the estimated scale elasticities for all sizes of establishment are statistically insignificantly different from one. Thus, the result confirms and strengthens Nguyen and Reznek's finding that a large establishment size is not a necessary condition for efficient production.     

Downsizing and productivity growth: Myth or reality?

The conventional wisdom is that the rising productivity in the U.S. manufacturing sector in the 1980s has been driven by the apparently pervasive downsizing over this period. Aggregate evidence clearly shows falling employment accompanying the rise in productivity. In this paper, we examine the microeconomic evidence using the plant level data from the Longitudinal Research Database (LRD). In contrast to the conventional wisdom, we find that plants that increased employment as well as productivity contribute almost as much to overall productivity growth in the 1980s as the plants that increased productivity at the expense of employment. Further, there are striking differences by sector (defined by industry, size, region, wages, and ownership type) in the allocation of plants in terms of whether they upsize or downsize and whether they increase or decrease productivity. Nevertheless, in spite of the striking differences across sectors defined in a variety of ways, most of the variance of productivity and employment growth is accounted for by idiosyncratic factors.     

Exports,firm size,and firm dynamics

This paper explores the relationships between exports, firm size, and firm dynamics. It is based on a unique longitudinal data set collected at the establishment level, covering some 7000 manufacturing German firms. We present stylized facts on exports and firm size, showing that the probability that a firm is an exporter increases with firm size; however, there are many successful exporters among small firms, and non-exporters among larger firms, too, while most of the exports are from the top size groups of firms. An econometric study shows a picture that is consistent with theoretical considerations: The impact of firm size on exports is positive but decreasing, while human capital intensity, domestic market share, and advanced technology all have a positive influence on the export performance of a firm. Firm growth and export performance are positively related, as is expected from a model of a price-discriminating monopolist.     

Taking a positive approach to organizational downsizing

We drew from the literature on positive organizational behaviour (Luthans & Youssef, 2007) to test a process model relating generalized optimism (Carver & Scheier, 1999) to the cognitions, affect, and behaviour of 237 Canadian federal government managers during and following a major organizational downsizing. Our data supported a model in which generalized optimism measured 18 months prior to the downsizing (T1) associated positively with managers' cognitions, attitudes, job performance, and self‐reported coping effectiveness measured 12 months postdownsizing (T3). Analyses suggested that some of these associations were partially mediated by a positive thinking coping strategy and expectations for future career and job success reported during the downsizing (T2). We advocate for more research that draws from the positive organizational behaviour literature to study the effects of downsizing on survivors. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.     

How do manufacturing exports react to the real exchange rate and foreign demand? The Chilean case

How do manufacturing exports react to the real exchange rate and to foreign demand? We investigate this question with a Chilean panel data spanning from 2003Q1 to 2016Q4, using publicly available data. In the long term, we find that exports strongly co-integrate with external demand, whereas not with the level of the real exchange rate. The short-run elasticities of manufacturing exports differ in size: (a) the elasticity of foreign demand—approximated by trading partners' activity aggregates—ranges between 0.8 and 1.4; and (b) the elasticity with respect to the bilateral real exchange rate is comprehended in the interval [0.4–0.6]. Core estimated elasticities pass usual robustness checks. The fall in manufacturing exports' growth in 2014–16 is consistent with a persistent slowdown in foreign demand, which has been partially offset by an average depreciation of the bilateral real exchange rate (with respect to destination countries of these exports). The transience of the effect of the real exchange rate is coherent with its exhibited stationarity and also consistent with its role of shock absorber.     

中国机床制造业跨境并购动因研究——从贸易条件的角度分析

文章通过对我国通用设备制造业1996～2007年的进出口数据分析表明,我国机床制造业在劳动生产率不断提高的同时,在1997～2003年贸易条件不断恶化,说明单纯依靠降低价格、扩大出口数量的方式已经不能改善贸易条件,企业需要通过提高出口产品技术含量的方式来改善贸易条件。2002～2006年的技术寻求型对外直接投资改善了我国机床制造业在2003～2007年的贸易条件。产品出口的贸易条件恶化是我国机床制造业跨境M&As的内在动因。     

How Leadership Characteristics Affect Organizational Decline and Downsizing

While studies have investigated the moral issue associated with downsizing, little research attention has been directed to leaders’ behaviors that result in organizational decline and eventually lead them to make a downsizing decision. This study tests a sequence-based model to assess (1) the impact of leaders’ risk-aversion and self-centeredness on organizational decline and downsizing and (2) the impact of organizational and industry decline on organizational downsizing. We address a gap in the decline literature that has only implicitly alluded to leadership characteristics as forerunners of decline. Data collected from 85 firms indicate that both leadership risk-aversion and self-centeredness are significantly related to organizational decline. This results in intensified organizational downsizing. However, industry decline affects downsizing more significantly.     

Establishment exits in Germany: the role of size and age

Using comprehensive data for West Germany, this paper investigates the determinants of establishment exit. We find that between 1975 and 2006 the average exit rate has risen considerably. In order to test various “liabilities” of establishment survival identified in the literature, we analyzed the impact of establishment size and put a special focus on differences between young and mature establishments. Our empirical analysis shows that the mortality risk falls with establishment size, which confirms the liability of smallness. The probability of exit is substantially higher for young establishments which are not more than 5 years old, thus confirming the liability of newness. There also exists a liability of aging since exit rates first decline over time, reaching a minimum at ages 15–18, and then rise again somewhat. The determinants of exit differ substantially between young and mature establishments, suggesting that young establishments are more vulnerable in a number of ways.     

Examining the Role of Informational Justice in the Wake of Downsizing from an Organizational Relationship Management Perspective

The purpose of this study was to examine how employees’ experiences, in the wake of an organization’s downsizing, would influence employee–organization relationships and the employees’ decisions to remain with the organization. In investigating survivors’ responses to downsizing, informational justice was chosen as an antecedent of the survivors’ intentions to leave and Organization–Public Relationship (OPR) was hypothesized to function as a mediator between informational justice and turnover intentions. The results revealed significant associations between informational justice and OPR as well as associations between OPR and turnover intentions in a downsizing context. Also, it was shown that OPR mediates the relationship between informational justice perceptions during the downsizing and turnover intentions after the downsizing.     

Small firm entry in manufacturing industries: Lower Saxony, 1979–1989

This paper is an empirical study of inter-industry and inter-temporal variations in entry of new firms using longitudinal data covering all manufacturing establishments in Lower Saxony between 1979 and 1989. Patterns of entry are reported for 29 industries based on numbers of new firms, gross rates of entry, and entry intensities (shares of employees) in different types and size classes of new firms. Entry varies considerably between firm types, industries, and over time. Focussing on entry by small single firms an empirical model is applied to search for industry characteristics that are highly correlated with entry. Pooling of cross-section and time-series data allows to control for influences of varying macroeconomic conditions and unobserved industry characteristics. A highly robust estimation method is applied for the first time in a study of entry rates, and it turns out that extreme observations often have large effect on the results. Entry intensity tends to be positively related to industry growth, concentration, and high unemployment, but negatively to high interest rates, profits, and (insignificantly) to intensive use of capital and R&D. I plead for further research vialearning by asking those who are doing.This paper is part of the research project Production, Employment Growth, and Exports by Lower Saxonian Firms. The computations based on the establishment level data from the official surveys of the manufacturing sector were made possible by a special arrangement between the Ministry of Economics, the Statistical Office, and the Labor Research Group at the Department of Economics, Hannover University. I thank Uwe Rode from the Lower Saxonian Statistical Office for preparing the longitudinal establishment level data base. Financial support from research funds provided by the state of Lower Saxony is gratefully acknowledged.     

New and Small Firms in Expanding Markets

The recent expansion of markets and increased standardization has not, as might be expected, been associated with an expansion of the role of larger firms. Recent data on new and small firms has indicated a substantial and expanding role for new and small firms in the global economy. There appear to be substantial differences between sectors, as competitive advantage is some is achieved through aggregation (upsizing) and in others thorough disaggregation (downsizing) of the productive process. New data is providing new knowledge on the role of firm size and age on economic growth. The advanced economices of the future will not be dominated by old, large firms.     

Cure or curse: Does downsizing increase the likelihood of bankruptcy?

Downsizing is a common organizational practice, yet research on the outcomes of downsizing has produced mixed findings. To contribute to this debate, we use an organizational change perspective to investigate whether the large-scale changes inherent in downsizing set firms on a negative path that is difficult to overcome and ultimately increases the likelihood of bankruptcy. Additionally, we investigate what factors, if any, can mitigate this likelihood. To do so, we build on the resource-based view to suggest that valuable resources can reduce the likelihood that downsizing will lead to bankruptcy. We find support for our theorizing across a sample of publicly traded firms. Our findings suggest that downsizing firms are significantly more likely to declare bankruptcy than firms that do not engage in downsizing and that intangible resources help to mitigate this likelihood. We do not, however, find support for the role of physical and financial resources in preventing bankruptcy.     

Trade‐Adjusted Concentration Ratios in the US Manufacturing Sector

This paper incorporates international trade into the four‐firm concentration ratio to get a more realistic measure of market structure in the US manufacturing sector using 1997 and 2002 NAICS data. As expected, trade‐adjusted CR₄ is significantly lower than the published CR₄. Moreover, the effect of international trade is higher in 2002 than in 1997, offsetting the increase in domestic concentration and leaving the US manufacturing sector in 2002 as competitive as it was in 1997. Furthermore, different tests are used to check the validity of the results. All of them confirm that trade‐adjusted CR₄s are significantly lower than their published counterparts.     

中国出口制造业投入服务化水平测度——基于贸易增加值视角

本文根据2018版OECD-ICIO数据,采用贸易增加值测算法测度了2005-2015年中国出口制造业投入服务化水平,我们发现:在考虑出口二元结构的条件下,2005-2015年中国制造业整体投入服务化水平平均值为26.89%,呈上升趋势;国内投入服务化水平高于国外且呈现出不断"以国内服务替代国外服务"的变动趋势;相比于一般贸易,加工贸易出口制造业投入服务化水平更高但增速较缓,加工贸易国内服务投入比重较低但服务化增速较快;相比于资本和知识密集型制造业,劳动密集型制造业的高端生产性服务尤其是国内高端服务投入比重较低。     

Job Flows and Job Quality by Establishment Size in the Finnish Manufacturing Sector 1980–94

This paper studies how employment patterns and growth vary with establishment size in the Finnish manufacturing sector during the period 1980–94. The findings are compared with the predictions of alternative theories of firm growth. The paper also examines some aspects of job quality in different size categories, including wages, labour productivity, working hours, labour turnover and the persistence of jobs. According to the findings, small establishments create and destroy jobs relatively more than large establishments. In addition, in the smallest size categories both the share of gross job creation and the share of gross job destruction is larger than the share of employment. However, there is no clear relationship between establishment size and net employment change. Furthermore, after studying different aspects of job quality, we can conclude that the jobs offered by small and large establishments differ greatly in many respects and it is difficult to evaluate the total welfare effect.     

Cheap Imports and the Loss of US Manufacturing Jobs

This study examines the role of international trade and specifically imports from low‐wage countries, in determining patterns of job loss in U.S. manufacturing industries between 1992 and 2007. Motivated by intuitions from factor‐proportions‐inspired work on offshoring and heterogeneous firms in trade, we build industry‐level measures of import competition. Combining worker data from the Longitudinal Employer‐Household Dynamics data set, detailed establishment information from the Census of Manufactures and transaction‐level trade data, we find that rising import competition from China and other developing economies increases the likelihood of job loss among manufacturing workers with less than a high school degree; it is not significantly related to job losses for workers with at least a college degree.