When digitalization speeds, what happens to the people’s needs? Exploring the Timing of Downsizing and the Human Costs of Technological Change
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2025-06-30
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en
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Once treated as separate levers, digitalization and downsizing now interact to reshape
how companies create and capture value in today’s corporate strategy landscape. This thesis
investigates the complex relationship between employee downsizing, employee morale, and
firm performance in the context of digitalization. Grounded in the Social Exchange Theory and
the Temporal Perspective, this thesis examines how the timing of downsizing and digitalization
impacts firm performance mediated by employee morale. Results from automated content
analysis and traditional financial data indicate that proactive downsizing within the context of
digitalization does not significantly influence employee morale and firm performance. This
suggests that the timing of downsizing alone is not a decisive factor; it is not just when a
company downsizes, but how the process is managed. This thesis complements the downsizing
literature. It gives managers valuable and practical considerations when engaging in employee
downsizing practices. This thesis emphasizes the need to assess firm and employee morale
factors carefully.
Furthermore, this thesis points to a path that future studies could pursue, namely, how
the timing of downsizing improves firm performance and employee morale. Although earlier
research suggests that proactive downsizing gives firms the flexibility to plan carefully, gain
time, and reduce pressure, this presumption may not hold in the context of digitalization. Future
studies should determine why downsizing might be beneficial after digitalization and how this
positive influence affects outcomes.
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Faculteit der Managementwetenschappen