How Is the Effect of R&D Investment on Employee Downsizing? Evidence in Spanish Manufacturing Firms

Resum

This study explores how the effect of R&D investment (representing the level of firm specific technological knowledge) on employee downsizing is. To the best of our knowledge, this study is among the first to examine how such relationship may be (linear or curvilinear) in the field of management. Our arguments are based on Transaction Cost Economics, the Knowledge-Based View, the Resource-Based View, and Relational View. These views offers complementary lens for better understanding how firms manage their R&D investments and, ultimately, for interpreting how may be the potential effect of such investments on downsizing. The empirical setting is a sample of Spanish manufacturing firms between 1994 and 2006. Our results provide strong support for a U-shaped link between the level of R&D intensity and the propensity of firms to carry out significant reductions in workforce. This suggests that investment in R&D of firms has a positive impact on employment only up to a certain threshold and then negative beyond. Some important implications for managers and policy makers are derived from our findings.