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Should the smiling curve frown during an economic downturn to enhance firm performance?

Published online by Cambridge University Press:  24 March 2015

Chin-jung Luan  and
Chengli Tien
Chin-jung Luan
Affiliation:
Department of International Business, National Dong Hwa University, Shoufeng, Hualien, Taiwan, ROC
Chengli Tien*
Affiliation:
Department of East Asian Studies, National Taiwan Normal University, Taipei, Taiwan, ROC
*
Corresponding author: cltien@ntnu.edu.tw
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Abstract

This study examines the efficacy of the smiling curve, and clarifies the relationship between downsizing strategies (advertising, marketing, and research and development, respectively) and firm performance specifically in an economic downturn. This study tests hypotheses using 1996–2010 data from the Taiwan Economic Journal on 436 listed Taiwanese companies. The results indicate that the benefits for firms to follow the smiling curve may not occur in the short term and that downsizing strategies may not always be the appropriate strategy to improve firm performance. During an economic downturn, downsizing strategies do not appear to enhance firm performance, that is, the smiling curve should not frown during an economic downturn to enhance firm performance.

Keywords

smiling curvedownsizingcompetitive advantagefirm performanceeconomic downturn
Type
Research Article
Information
Journal of Management & Organization , Volume 21 , Issue 5 , September 2015 , pp. 573 - 593
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2015 

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