Necessary and Sufficient Factors in Employee Downsizing? a Qualitative Comparative Analysis of Lay-Offs in France and the UK, 2008-2013
This paper examines causal factors behind large-scale employee downsizing in two different settings, France and the UK, from 2008 to 2013, i.e. in the context of the great financial crisis. Our comparative study is embedded in two sets of literature: financialization and institutional analysis. Financialization refers to the increased importance of financial considerations in the governance of companies made possible by important structural changes in the economy, most notably the liberalization of capital flows across borders and the growth in the financial assets of shareholder value driven funds. As a result, an unprecedented amount of capital is moving across international financial markets in search for liquid and profitable investment opportunities. Translated at the level of the firm, financialization refers to the ascendency of shareholder value as the guiding star for firm strategy that prioritizes the interests of shareholders at the expense of other actors in the corporation, most notably employees, thereby resulting in a major redistribution of wealth.
Institutional approaches, on the other hand, constitute a mid-range theory that illustrates how conflict over resources and strategic choices is mediated by the institutional setting in which they are taking place. Institutional arrangements matter because they enable and constrain different firm-level actors in their competing claims over the allocation of resources and, more broadly, over the governance of the firm. Institutions enables stakeholders to translate their preferences into outcomes by shaping power relationships at the firm-level.
Our argument centres on the necessity of situating corporate HR strategies, in respect to employee downsizing, within a context that incorporates both the priorities of financialization within firms and the importance of institutional diversity across national business systems. To effectively address this challenge, our study of employee downsizing in France and the United Kingdom is based on the use of the Qualitative Comparative Analysis (QCA) method. We develop our theoretical framework by examining the impact of three firm-level financialized variables on the implementation of large-scale redundancy schemes: leverage, categories of institutional investors, and ownership structures of companies. Our empirical results illustrate that the spread of financialization, in the form of employee downsizing, is indeed occurring but its diffusion across countries is shaped by different configurations of causal factors.