Returns to Scale from Labor Specialization: Evidence from Global Asset Management

Luo, Mancy; Manconi, Alberto; Schumacher, David

doi:10.2139/ssrn.2638658

Returns to Scale from Labor Specialization: Evidence from Global Asset Management

60 Pages Posted: 2 Aug 2015 Last revised: 26 Apr 2019

See all articles by Mancy Luo

Mancy Luo

Erasmus University - Rotterdam School of Management

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

David Schumacher

McGill University

Date Written: April 24, 2019

Abstract

We use mergers in the global asset management industry to study the returns to scale from labor specialization. Mergers are followed by an increase in managerial turnover that assigns fund managers to more specialized tasks. This leads to increased specialization and product differentiation, creating an incremental $60 million of value added per merger per year on average. Such value creation is concentrated in “mergers of equals” that lead to the largest increases in firm size. Our results provide direct and quantifiable evidence on the value of the firm’s role in assigning employees to tasks.

Keywords: Economies of Scale, Labor Specialization, Human Capital Productivity, Mergers & Acquisitions, Asset Management

JEL Classification: D20, D24, G23, G34, J24

Suggested Citation: Suggested Citation

Luo, Mancy and Manconi, Alberto and Schumacher, David, Returns to Scale from Labor Specialization: Evidence from Global Asset Management (April 24, 2019). Available at SSRN: https://ssrn.com/abstract=2638658 or http://dx.doi.org/10.2139/ssrn.2638658