Individuals’ Responses to Economic Cycles: Organizational Relevance and a Multilevel Theoretical Integration

The state of the economy represents a concern for individuals and shapes their behavior in profound ways. The current review of studies on how individuals respond to economic cycles reveals that organizational relevance of such responses has often not been considered, and the literature is characterized by a variety of seemingly disconnected explanations for how and why individuals respond to the perceived state of the economy. I develop a theoretical framework that systematizes the literature and accounts for the seemingly disparate findings, highlighting the underlying functionality of such responses for individuals. I then integrate the literature on individual responses to economic cycles with organizational research to examine the meaning of different individual responses from the perspective of organizational functioning. This integration generates a novel insight that individually functional responses to economic cycles can be dysfunctional from the perspective of organizations, often hindering rather than helping organizations’ performance and undermining the well-being of other organizational members. The systematization of the literature also reveals that many responses which would be predicted by the identified theoretical processes and which would be also relevant to organizations have not been studied, laying an agenda for future organizational research.