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Downsizing Announcements, Job Security Perceptions, and Worksite Performance

In: Workplace Productivity and Management Practices

Author

Listed:
  • Guido Friebel
  • Matthias Heinz
  • Ingo Weller
  • Nick Zubanov

Abstract

Using data from a retail chain of 193 bakery shops that underwent downsizing, we study the effects of two types of downsizing announcements – closure or sale to another operator – on sales in the affected shops, and how these effects are moderated by job security perceptions. On average, sales in the affected shops go down by 26% after a closure announcement and by 7% after a sale announcement. Sales decline more sharply in shops where employees had higher job security perceptions before the announcement. Our findings are consistent with psychological contract theory: a breach of an implicit contract promising job security in exchange for work effort results in a reciprocal effort withdrawal. We rule out several alternative explanations to our findings.

Suggested Citation

  • Guido Friebel & Matthias Heinz & Ingo Weller & Nick Zubanov, 2021. "Downsizing Announcements, Job Security Perceptions, and Worksite Performance," Research in Labor Economics, in: Workplace Productivity and Management Practices, volume 49, pages 179-205, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-912120210000049007
    DOI: 10.1108/S0147-912120210000049007
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    More about this item

    Keywords

    Downsizing announcements; performance; job security; relational psychological contract; insider econometrics; retail; J53; M54; L25;
    All these keywords.

    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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