Downsizing Theory

3. Theory and hypotheses

Institutional theory of downsizing Downsizing has been one of the most critical strategies for firms facing managerial challenges. Particularly in an era of global financial depression, many firms have adopted organisational downsizing strategies to survive (Wilkinson, 2005). The performance and Total Quality Management 249 Downloaded by [University of Johannesburg] at 05:55 09 May 2016 effectiveness of downsizing have been controversial, generally harmed employees and their families, and even caused social problems (Mckinley et al., 2000; Mckee-Ryan & Kinicki, 2002; Tsai & Yen, 2008). The reasons for downsizing popularity have been investigated, including its negative effects. McKinley et al. (1995, 2000) have proposed

According to the explanations of institutional downsizing theory proposed by McKinley et al. (1995, 2000), social institutional forces motivate firms to execute organisational downsizing strategy. The forces include constraining, cloning, and learning. Managers consider organisational downsizing as an unavoidable action with legitimacy and ethical acceptability via the psychological process of socio-cognition. The influence of institutionalism on external behaviours and practices in organisational downsizing Using qualitative research on 18 firms in Taiwan, Tsai et al. (2006) verified the contention that institutional factors induce internal motivations for organisational downsizing. They further proposed that downsizing motivation is a combination of economic, institutional, and socio-cognitive factors. Most firms forming downsizing motivation prioritise benefits; however, to maintain a certain social image and to gain expected advantage, external downsizing behaviours generally follow recognised social norms. Findings from Tsai et al. (2006) demonstrate that most firms have adopted a mild and gradual strategy to execute downsizing, which is linked with

Creating and enhancing the above intellectual capital depend on employees. Firms should therefore possess a set of HRM practices to create and strengthen intellectual capital post downsizing and to ensure the success of an organisational downsizing strategy. The set of HRM practices is comprehensively systematic and is relevant in the era of knowledge economy; therefore, we propose using this set to verify institutional downsizing theory, which might contribute greatly to its development. Total Quality Management 251 Downloaded by [University of Johannesburg] at 05:55 09 May 2016 Individual strategies, practices, and international context According to basic logic and managerial mentality, firms should consider their external management environments, internal/external resources, and overall management strategy to formulate various downsizing strategies to improve corporate performance (Cascio & Wynn, 2004; Datta et al., 2010). This is particularly true for MNCs with various host country cultural backgrounds. For example, the USA and European countries are generally capitalistic; however, European societies are more socialistic. Regarding general management practices, Americans are more outcome-oriented, whereas Europeans