The Influence of Downsizing on Market Orientation and Financial Performance

Abstract

This study takes a n
interdisciplinary ap p roach to
ex p la in in g the in flu en ce o f
dow nsizing on fin an cial
perform ance. Previous research
in this area suggests a degree o f
eq u iv o c a lity reg a rd in g th is
relationship. By offering m arket
o rien ta tio n as a m ed ia tin g
variable, this study offers insight
into how downsizing can be best
approached by organizations fo r
the purpose o f m axim izing both
m arket orien tation an d
perform ance. H ie results suggest
that merely reducing headcount
may have a detrim ental effect on
an organ ization 's a b ility to
m aintain m arket orientation
a n d m eet p e r fo r m a n c e
e x p ec ta tio n s. A ltern a tiv ely ,
organizations that sought new
strategic options were better able
to sustain m arket orientation,
resulting in better fin a n c ia l
perform ance