Organizational Decline and Innovation in Public Organizations: A Contextual Framework of Cutback Management.

Abstract

In times of organizational decline, innovation is seen by many as crucial to uphold and improve public service delivery and “do more with less.” However, innovation in times of decline is not a given. The cutback management literature currently lacks a theoretical frame that accounts for the relationship between cutback management strategies and innovation in the face of decline. This article provides a theoretically grounded framework that formulates theoretical propositions regarding the relationships between cutback management strategies, organizational innovation, and organizational context. First, the literature on cutback management strategies is reviewed and abstracted into a typology of proportional versus targeted strategies and open versus closed strategies. This typology is connected to the literature on organizational response to develop propositions concerning the effect of cutback management strategies on innovation. The article posits that targeted and open strategies may contribute to innovation, whereas proportional and closed strategies are likely to result in decreased innovation. Second, propositions are developed concerning the contextual circumstances in which the different cutback management strategies are likely to be adopted. This contextual framework discusses contextual factors related to the nature of decline, environmental factors, and organizational factors.