The purpose of this paper is to study how job reductions affect product innovation and marketing innovation in a sample of 2,034 Spanish manufacturing firms in the period 2007–2014.
Poisson and logistic regression models with random effects were used to analyse the impact of downsizing on some innovation outcomes of firms.
The results of this research show that the stressful measure of job reductions may have unexpected consequences, stimulating innovation. However downsizing combined with radical organisational changes such as new equipment, techniques or processes seems to have a negative impact on product and marketing innovation.
This research has two original features. First, it explores the unconventional direction of causality from the planned elimination of jobs to innovation outputs. Secondly, the paper looks at the combined effect of downsizing and other restructuring measures on different types of innovation. Following the threat-rigidity theory, we assume that this combination represents a major threat for survivors that leads to lower levels of product and marketing innovation.
