Downsizing and productivity: The case of UK motor vehicle manufacturing 1974-1994

Abstract

An empirical investigation of the downsizing–productivity relationship has emerged from the USA. This paper presents further evidence drawn from another country's experience. Detailed commentary on key trends in the UK motor vehicle industry informs an analysis applying the Baily et al. [Baily, Bartelsman and Haltiwanger (1994) Downsizing and productivity growth: myth or reality? National Bureau of Economic Research Working Paper No. 4741; (1996a) Downsizing and productivity growth: myth or reality? In Sources of Productivity Growth (edited by D.G. Mayes), New York: Cambridge University Press; (1996b) Downsizing and productivity growth: myth or reality? Small Business Economics, 8, 259–278] taxonomic model, yielding insights into the varieties of downsizing–productivity linkages therein. Evidence presented shows productivity growth was indeed higher in those plants that successfully downsized, but that those plants that were unsuccessful at downsizing tended to have among the worst productivity growth rates. Unsuccessful downsizers accounted for a significant part of the overall decline in productivity after 1989. Copyright © 1999 John Wiley & Sons, Ltd.