Employee Lay-Off Under Different Modes of Restructuring

28 Pages Posted: 23 Jan 2006

See all articles by Kristien Coucke

Kristien Coucke

Vlerick Business School - Entrepreneurship, Governance and Strategy

Enrico Pennings

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

Leo Evariste Sleuwaegen

Vlerick Leuven Gent Management School

Abstract

In recent years, there has been a growing concern about the effect of globalisation on employment in most West European countries. More and more firms had to drastically restructure their operations in order to survive the rise in global competition. Restructuring often leads to a collective lay-off of employees. We use a theoretical model to examine how firm and industry characteristics have an impact on different modes of restructuring. (1) Close down part of its activities and relocate abroad, (2) Downsizing through a significant decrease in employees or (3) Dismiss all employees and exit the market. Using a unique sample of Belgian firms reporting collective layoffs, we test empirically the predictions of the model. Relocating firms are found to be most profitable among the restructuring firms, have invested more in the recent past, operate in sectors with significant economies of scale and belong more often to a multinational group than firms opting for downsizing or exit. Downsizing firms are more capital intensive than relocating firms, while exiting firms are less profitable, smaller, younger and more labour intensive than downsizing or relocating firms.

Keywords: Relocation, Downsizing, Exit

Suggested Citation

Coucke, Kristien and Pennings, Enrico and Sleuwaegen, Leo Evariste, Employee Lay-Off Under Different Modes of Restructuring. Available at SSRN: https://ssrn.com/abstract=876563 or http://dx.doi.org/10.2139/ssrn.876563

Kristien Coucke (Contact Author)

Vlerick Business School - Entrepreneurship, Governance and Strategy ( email )

Vlamingenstraat 83
Leuven, B-3000
Belgium
+32 16 323635 (Phone)

HOME PAGE: http://www.vlerick.be/research/db/search.cfm?menu1=764

Enrico Pennings

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Leo Evariste Sleuwaegen

Vlerick Leuven Gent Management School ( email )

Library
REEP 1
Gent, BE-9000
Belgium
003292109727 (Phone)
003292109747 (Fax)

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