This article examines the effects of collective layoff announcements on sales and marketing-mix elasticities, accounting for supply-side constraints. The authors study 205 announcements in the automotive industry using a difference-in-differences model. They find that, following collective layoff announcements, layoff firms experience adverse changes in sales, advertising elasticity, and price elasticity. They explore the moderating role of announcement characteristics on these changes and find that collective layoff announcements by domestic firms and announcements that do not mention a decline in demand as a motive are more likely to be followed by adverse marketing-mix elasticity changes. On average, sales for the layoff firm in the layoff country are 8.7% lower following a collective layoff announcement than their predicted levels absent the announcement. Similarly, advertising elasticity is 9.8% lower and price elasticity is 19.2% higher than absent the announcement. Conversely, layoff firms typically decrease advertising spending in the country where collective layoffs have occurred, yet they do not change prices. These findings are relevant to marketing managers of firms undergoing collective layoffs and to analysts of collective layoff decisions.
BaileyDavidde RuyterAlexMichieJonathanTylerPeter, (2010), “Global Restructuring and the Auto Industry,” Cambridge Journal of Regions Economy and Society, 3 (3), 311–18.
4.
BartleyTimChildCurtis (2011), “Movements, Markets and Fields: The Effects of Anti-Sweatshop Campaigns on U.S. Firms, 1993–2000,” Social Forces, 90 (2), 425–51.
5.
BechwatiNada NasrMorrinMaureen, (2003) “Outraged Consumers: Getting Even at the Expense of Getting a Good Deal,” Journal of Consumer Psychology, 13 (4), 440–53.
6.
BresnahanTimothy F.RameyValerie A. (1993), “Segment Shifts and Capacity Utilization in the U.S. Automobile Industry,” American Economic Review Papers and Proceedings, 83 (2), 213–18.
7.
BrugemanValerie SatheHillKimCreggerJoshua (2011), Repurposing Former Automotive Manufacturing Sites. Ann Arbor, MI: Center for Automotive Research.
8.
ByzalovDmitriShacharRon (2004), “The Risk Reduction Role of Advertising,” Quantitative Marketing and Economics, 2 (4), 283–320.
9.
ChaikenShelly (1980), “Heuristic Versus Systematic Information Processing and the Use of Source Versus Message Cues in Persuasion,” Journal of Personality and Social Psychology, 39 (5), 752–66.
10.
ChevalierJudith A.GoolsbeeAustan (2009), “Are Durable Goods Consumers Forward-Looking? Evidence from College Textbooks,” Quarterly Journal of Economics, 124 (4), 1853–84.
11.
CleerenKathleenvan HeerdeHarald J.DekimpeMarnik G. (2013), “Rising from the Ashes: How Brands and Categories Can Overcome Product-Harm Crises,” Journal of Marketing, 77 (2), 58–77.
12.
ColicevAnatoliMalsheAshwinPauwelsKoenO’ConnorPeter (2018), “Improving Consumer Mindset Metrics and Shareholder Value Through Social Media: The Different Roles of Owned and Earned Media.” Journal of Marketing, 82 (1), 37–56.
13.
CoxLouis A.JrPopkenDouglas A.SunRichard X. (2018), “Causal Concepts, Principles, and Algorithms,” in Causal Analytics for Applied Risk Analysis. International Series in Operations Research & Management Science, Vol. 270. Cham, Switzerland: Springer.
14.
CrillyDonaldNiNaJiangYuwei (2016), “Do-No-Harm Versus Do-Good Social Responsibility: Attributional Thinking and the Liability of Foreignness,” Strategic Management Journal, 37 (7), 1316–29.
15.
DattaDeepak K.GuthrieJames P.BasuilDynahPandeyAlankrita (2010), “Causes and Effects of Employee Downsizing: A Review and Synthesis,” Journal of Management, 36 (1), 281–348.
ErdemTulinSwaitJoffreLouviereJordan (2002), “The Impact of Brand Credibility on Consumer Price Sensitivity,” International Journal of Research in Marketing, 19 (1), 1–19.
FlanaganDavid J.O’ShaughnessyK.C. (2005), “The Effects of Layoffs on Firm Reputation,” Journal of Management, 31 (3), 445–63.
20.
FreemanSarah J.CameronKim S. (1993), “Organizational Downsizing: A Convergence and Reorientation Framework,” Organization Science, 4 (1), 12–29.
21.
GuthrieJames P.DattaDeepak K. (2008), “Dumb and Dumber: The Impact of Downsizing on Firm Performance as Moderated by Industry Conditions,” Organization Science, 19 (1), 108–23.
22.
HabelJohannesKlarmannMartin (2015), “Customer Reactions to Downsizing: When and How Is Satisfaction Affected?” Journal of the Academy of Marketing Science, 43 (6), 1–22.
23.
HastingsJustine S.WilliamsMichael A. (2016), “What Is a ‘But-For World’?” Antitrust, 31 (1), 102–08.
24.
HirschmanAlbert O. (1970), Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge, MA: Harvard University Press.
25.
HomburgChristianKlarmannMartinStaritzSabine (2012), “Customer Uncertainty Following Downsizing: The Effects of Extent of Downsizing and Open Communication,” Journal of Marketing, 76 (3), 112–29.
26.
HuberFrankVollhardtKaiMatthesIsabelVogelJohannes (2010), “Brand Misconduct: Consequences on Consumer–Brand Relationships,” Journal Business Research, 63 (11), 1113–20.
27.
KleinJill GabrielleCraig SmithN.JohnAndrew (2004), “Why We Boycott: Consumer Motivations for Boycott Participation,” Journal of Marketing, 68 (3), 92–109.
28.
KlierThomasRubensteinJim (2011), “Configuration of the North American and European Auto Industries—A Comparison and Trends,” European Review of Industrial Economics, 3, http://revel.unice.fr/eriep/index.html?id=3369.
29.
KlierThomasRubensteinJim (2015), “Auto Production Footprints: Comparing Europe and North America,” Economic Perspectives, 39 (4), 101–19.
30.
KnittelChristopher R.StangoVictor (2013), “Celebrity Endorsements, Firm Value, and Reputation Risk: Evidence from the Tiger Woods Scandal,” Management Science, 60 (1), 21–37.
31.
LewinJeffrey E. (2009), “Business Customers’ Satisfaction: What Happens When Suppliers Downsize?” Industrial Marketing Management, 38 (3), 283–99.
32.
LewinJeffrey E.JohnstonWesley J. (2008), “The Impact of Supplier Downsizing on Performance, Satisfaction over Time, and Repurchase Intentions,” Journal of Business & Industrial Marketing, 23 (4), 249–55.
33.
LiuYanShankarVenkatesh (2015), “The Dynamic Impact of Product-Harm Crises on Brand Preference and Advertising Effectiveness: An Empirical Analysis of the Automobile Industry,” Management Science, 61 (10), 2514–35.
34.
LoveE. GeoffreyKraatzMatthew (2009), “Character, Conformity, or the Bottom Line? How and Why Downsizing Affected Corporate Reputation,” Academy of Management Journal, 52 (2), 314–35.
35.
MahajanVijaySharmaSubhashBuzzellRobert D. (1993), “Assessing the Impact of Competitive Entry on Market Expansion and Incumbent Sales,” Journal of Marketing, 57 (3), 39–52.
36.
McElroyJames C.MorrowPaula C.RudeScott N. (2001), “Turnover and Organizational Performance: A Comparative Analysis of the Effects of Voluntary, Involuntary, and Reduction-in-Force Turnover,” Journal of Applied Psychology, 86 (6), 1294–99.
37.
MendozaSaaid A.LaneSean P.AmodioDavid M. (2014), “For Members Only: Ingroup Punishment of Fairness Norm Violations in the Ultimatum Game,” Social Psychological and Personality Science, 5 (6), 662–70.
MorrisonElizabeth W.RobinsonSandra L. (1997), “When Employees Feel Betrayed: A Model of How Psychological Contract Violation Develops,” Academy of Management Review, 22 (1), 226–57.
40.
NarayananSridharManchandaPuneet (2009), “Heterogeneous Learning and the Targeting of Marketing Communication for New Products,” Marketing Science, 28 (3), 424–41.
41.
NarayananSridharManchandaPuneetChintaguntaPradeep K. (2005), “Temporal Differences in the Role of Marketing Communication for New Product Categories,” Journal of Marketing Research, 42 (3), 278–91.
PanagopoulosNikolaos G.MullinsRyanAvramidisPanagiotis (2018), “Sales Force Downsizing and Firm-Idiosyncratic Risk: The Contingent Role of Investors’ Screening and Firm’s Signaling Processes,” Journal of Marketing, 82 (6), 71–88.
45.
PearlJudea (2009). Causality: Models, Reasoning and Inference. Cambridge, UK: Cambridge University Press.
46.
RinalloDiegoBasuroySuman (2009), “Does Advertising Spending Influence Media Coverage of the Advertiser?” Journal of Marketing, 73 (6), 33–46.
47.
RossiPeterAllenbyGregMcCullochRobert (2005), Bayesian Statistics and Marketing. Hoboken, NJ: John Wiley & Sons.
48.
ShahPriti P. (2000), “Network Destruction: The Structural Implications of Downsizing,” Academy of Management Journal, 43 (1), 101–12.
49.
SkarlickiDaniel P.EllardJohn H.KellnBrad R.C. (1998), “Third-Party Perceptions of a Layoff: Procedural, Derogation, and Retributive Aspects of Justice,” Journal of Applied Psychology, 83 (1), 119–27.
50.
SpellmanBarbara A.AlexandraKincannon, (2001), “The Relation Between Counterfactual (‘But For’) and Causal Reasoning: Experimental Findings and Implications for Jurors’ Decisions,” Law and Contemporary Problems: Causation in Law and Science, 64 (4), 241–64.
51.
SubramonyMaheshHoltomBrooks C. (2012), “The Long-Term Influence of Service Employee Attrition on Customer Outcome and Profit,” Journal of Service Research, 15 (4), 460–73.
52.
ValenzuelaAnaSrivastavaJoydeep (2012), “Role of Information Asymmetry and Situational Salience in Reducing Intergroup Bias: The Case of Ultimatum Games,” Personality and Social Psychology Bulletin, 38 (12), 1671–83.
53.
Van HeerdeHaraldHelsenKristiaanDekimpeMarnik G. (2007), “The Impact of a Product-Harm Crisis on Marketing Effectiveness,” Marketing Science, 26 (2), 230–45.
54.
WilliamsPaul M.KhanSajidNaumannEarl (2011), “Customer Dissatisfaction and Defection: The Hidden Costs of Downsizing,” Industrial Marketing Management, 40 (3), 405–13.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
