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Does Economic Crisis Spur Organizational Change? Evidence from Chilean Manufacturing Plants

Recent theoretical models have shown that when demand is slack, firms tend to introduce new management practices and/or reorganize their production methods; however, few micro econometric studies deal directly with the relationship between organizational change and economic crises. In this paper, we use data from Chilean manufacturing plants, and the international financial crisis of 1998, in a sort of 'natural experiment', to shed light on this phenomenon. Using National Survey of Technological Innovation statistics for two years both and before and during the financial crisis, we study how different measures of organizational change responded to the economic crisis. In addition, we analyse the impact on product and process innovation. Our results are consistent with the idea that economic crises make organizational change more likely, but that their effect is not limited to this kind of change or innovation.