The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets

51 Pages Posted: 31 Aug 2013 Last revised: 13 May 2014

See all articles by Geoffrey A. Tate

Geoffrey A. Tate

University of Maryland - Robert H. Smith School of Business; National Bureau of Economic Research (NBER)

Liu Yang

University of Maryland, Robert H. Smith School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: May 12, 2014

Abstract

We document differences in human capital deployment between diversified and focused firms. We find that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities. The opportunities and incentives provided in internal labor markets in turn affect the development of workers' human capital. We find that workers more frequently transition to other industries in which their diversified firms operate and with smaller wage losses than workers in the open market, even when they leave their original firms. Overall, internal labor markets provide a bright side to corporate diversification.

Keywords: Internal Labor Markets, Diversification, Real Options, Human Capital

Suggested Citation

Tate, Geoffrey A. and Yang, Liu A., The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets (May 12, 2014). US Census Bureau Center for Economic Studies Paper No. CES-WP- 13-40, Available at SSRN: https://ssrn.com/abstract=2318474 or http://dx.doi.org/10.2139/ssrn.2318474

Geoffrey A. Tate (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Liu A. Yang

University of Maryland, Robert H. Smith School of Business ( email )

4420 Van Munching Hall
Robert.H.Smith School of Business
College Park, MD 20742
United States
3014058794 (Phone)

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