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Downsizing is a common business management practice. Prior research has examined the financial consequences of downsizing or the impact on individuals remaining in a downsizing organization. Taking a resource-based perspective, this study integrates and extends prior research on downsizing by examining how downsizing influences the relative likelihood that a firm will experience one of three states in the three years following downsizing. Multinomial logistic regression is employed to test hypotheses using a sample of 445 firms that downsized during the period 1995 to 2000. The authors find significant differences in the relative likelihood of Chapter 11 bankruptcy, acquisition, or remaining a nonbankrupt going concern based on the size of the downsizing, firm-level intangible resources, the tangible asset intensity of the firm, and industry-level knowledge intensity. Implications for managers and future research are discussed.
