The Human Factor in Acquisitions: Cross-Industry Labor Mobility and Corporate Diversification

49 Pages Posted: 16 Mar 2015 Last revised: 29 Sep 2016

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

Multiple version iconThere are 2 versions of this paper

Date Written: September 26, 2016

Abstract

The benefits of internal labor markets are largest when they include industries that utilize similar worker skills, facilitating cross-industry worker reallocation and collaboration. We show that diversifying acquisitions occur more frequently among industry pairs with higher human capital transferability. Such acquisitions result in larger labor productivity gains and are less often undone in subsequent divestitures. Moreover, acquirers retain more high skill workers and more often transfer workers to jobs in other industries inside the merged firm. Overall, our results identify human capital as a source of value from corporate diversification and provide an explanation for seemingly unrelated acquisitions.

Keywords: Corporate Diversification, Mergers and Acquisitions, Internal Labor Markets, Worker Mobility, Human Capital Transferability

JEL Classification: G34, J24, J62, M51, M54

Suggested Citation

Tate, Geoffrey A. and Yang, Liu A., The Human Factor in Acquisitions: Cross-Industry Labor Mobility and Corporate Diversification (September 26, 2016). Available at SSRN: https://ssrn.com/abstract=2578636 or http://dx.doi.org/10.2139/ssrn.2578636

Geoffrey A. Tate

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

MD
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Liu A. Yang (Contact Author)

University of Maryland ( email )

College Park
College Park, MD 20742
United States

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