Staying Home or Moving Away? Restructuring Efforts within Multinational Enterprises

Abstract

This paper analyses the impact of geographic dispersion on employment changes within multinationals. Building on earlier work of Landier et al. (2009, Review of Financial Studies 22, 3: 1119), we investigate whether corporate decision‐making within a multinational is affected by the distance between an affiliate and its headquarter. Our findings suggest a detrimental impact of distance on employees, by either an increased likelihood of observing a downsizing event, or by witnessing a larger decrease in the number of employees at distant locations during downsizing events. In addition, our results seem to relate the higher likelihood of observing a downsizing event to the role of social factors on decision making. The more visible a manager is in his community, the less likely he is to downsize proximate divisions.

Don't Downsize This! Social Reactions to Mass Dismissals on Twitter

“…Remaining workers have also been shown to react to dismissals of their colleagues by reducing their effort and organisational engagement (Datta et al, 2010;Drzensky and Heinz, 2016;Van Dick et al, 2016;Sucher and Gupta, 2018;Heinz et al, 2020), thereby raising unit labour costs. Eventually, a more recent literature shows that firms refrain from cutting jobs close to headquarters and hypothesises that this strategy could aim at avoiding the reputational cost that dismissals of its members may induce with the local community (Landier et al, 2009;Abraham et al, 2014;Bassanini et al, 2017). In the present paper, we provide direct evidence that job-destruction announcements trigger negative reactions on social media which, in turn, prompt a loss in the firm's market value.…”

Escaping social pressure: Fixed-term contracts in multi-establishment firms

“…A last strand of literature shows that social pressure may also arise from the local community where the firm headquarters are located. As a reaction, firms tend to concentrate employment reductions, and in particular dismissals, in plants located further away from headquarters -see Landier et al (2009), Abraham, Goesaert and Konings (2014) and Bassanini et al, 2017. In this paper, we show that firms not only put up with social pressure.…”