Responsible downsizing strategy as a panacea to firm performance: the role of dynamic capabilities

Cheng-Fei Tsai Philip (International Business Administration, Wenzao Ursuline University of Languages, Kaohsiung, Taiwan)
Shih Chih-Ting (Department of Business Administration, National Pingtung Institute of Commerce, Pingtung, Taiwan)

International Journal of Manpower

ISSN: 0143-7720

Publication date: 11 November 2013



A subject of continuous debate in the field of organizational change research and management practices is on whether downsizing strategies result in improved firm performance. The purpose of this paper is to propose and empirically examine dynamic firm capabilities as a major missing mechanism of firm performance.


This study uses the data of 154 Taiwanese firms that employed an organizational downsizing strategy as the sample for testing the research question.


The results indicate that a responsible downsizing strategy can result in greater firm performance for the development and enhancement of dynamic firm capabilities.

Originality value

This research introduces dynamic capabilities into the downsizing context, and the empirical results provide new theoretical insight into downsizing and dynamic capabilities research, suggesting that downsizing should be regarded by management as resource management rather than a cost-cutting action.



The authors would like to thank the editor and the reviewers for their helpful comments on an earlier version of the paper.


Cheng-Fei Tsai, P. and Shih, C. (2013), "Responsible downsizing strategy as a panacea to firm performance: the role of dynamic capabilities", International Journal of Manpower, Vol. 34 No. 8, pp. 1015-1028.

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