In this chapter, we identify and address factors which may, either directly or indirectly, influence a firm’s decision to downsize. Generally speaking, downsizing has received scholarly attention since the mid 1980s. At that time, downsizing was associated primarily with decline (Whetten, 1980), and writers assumed that when organizations implemented downsizing, for example through involuntary layoffs, they were responding either to organizational decline or to cyclical drops in demand (Cappelli, 2000). Research on the phenomenon was conducted largely in US manufacturing firms by organizational scholars, and in local government operations by researchers in public administration.

In the intervening quarter century, research and theorizing on all aspects of downsizing have burgeoned. Concomitantly, the focus of downsizing research has widened: downsizing is not necessarily associated with decline, and it goes beyond layoffs – it encompasses other tactics and activities as well, including planned attrition, early retirements and buyouts, and may or may not involve organizational redesign and large-scale restructuring (Freeman, 1999). Downsizing research picked up steam in the late 1980s and early 1990s with the advent of widespread reductions in the salaried work forces of many organizations. Ever since, downsizing – framed both as a response to environmental conditions and as a proactive management strategy – (Cameron, Freeman, and Mishra, 1993) has continued unabated. It accompanied the shift to a knowledge economy and the globalization of competitive pressures; continued through the economic recovery and expansion of the late 1990s and early twenty-first century; and, more recently, was apparent in the near collapse of the economic system in the United States and much of the rest of the developed world.