5. Navigating the digital shift: downsizing magnitude and its timing under corporate digitalization

This chapter explores the relationship between employee downsizing and an organization's digital shift relative to its post-downsizing performance. While existing literature acknowledges the importance of timing for downsizing success, our study focuses on the timing of downsizing as contingent on the parallel implementation of an organization's digital strategy. Comparing firms that invested in digitalization with those that did not, we posit and test the relationship between the magnitude of downsizing and the benefits of a firm's investments in digitalization. We find that parallel implementation, particularly when the downsizing magnitude is substantial, is especially beneficial. Our insights contribute to the literature on employee downsizing in the context of an organization's evolving digital landscape.