Institutions, economies and downsizing: evidence across time and countries

Downsizing is a legitimate yet highly disruptive human resource management practice that organisations can activate when costs need to be cut. We adopt an institutionalist lens to explore how both legislative and economic forces combine to shape organisations’ adoption of employee downsizing practices. We conduct multilevel mixed-effects ordered probit regression analyses on our survey data on human resource management practices from 29 countries and four rounds of data collection spanning seventeen years. The findings indicate that variations in downsizing practices can be partly explained by differences in national legal institutions as well as by prevailing economic conditions. Importantly, we also find that constraints imposed by national regulatory institutions may be relaxed during periods of economic crisis. We theorise the interaction of coercive, mimetic and normative isomorphic effects to understand how organisational operating contexts are dynamic, whereby both constraints and opportunities can vary over time.