Henry Hornstein

Downsizing has a negative effect on corporate memory and employee morale, disrupts social networks, causes a loss of knowledge, and disrupts learning networks. As a result, downsizing risks handicapping and damaging the learning capacity of organizations. Further, given that downsizing is often associated with cutting costs, downsizing firms may provide less training for their employees, recruit less externally, and reduce the research and development budget. Consequently, downsizing could “hollow out” the firm’s skills capacity.

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