Abstract

This article examines the impact of downsizing on product innovation. It compares the experiences of product innovators in companies with a high degree of downsizing with those in companies with less downsizing. Higher downsizing hinders innovation by reducing people's ability to connect their product strategically to the firm. Specifically, downsizing breaks the network of relationships that innovators use to make these vital strategic connections. To overcome the negative consequences of downsizing on product innovation, managers should support innovation sponsors and champions, and retain "old timers" who constitute the network. They should also bolster the network by building more connections among departments, and between new and established businesses. Finally, they should incorporate innovation directly into their firm's strategy.