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

50 Pages Posted: 16 Mar 2011 Last revised: 17 May 2012

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 16, 2012

Abstract

We estimate the labor market consequences of corporate diversification using worker-firm matched data from the U.S. Census Bureau. We find evidence that workers in diversified firms have greater cross-industry mobility. Displaced workers experience significantly smaller losses when they move to a firm in a new industry in which their former firm also operates. We also find more active internal labor markets in diversified firms. Diversified firms exploit the option to redeploy workers internally from declining to expanding industries. Though diversified firms pay higher wages to retain workers, their labor is also more productive than focused firms of the same size, age, and industry. Overall, internal labor markets provide a bright side to corporate diversification.

Keywords: Diversification, Internal Labor Market

JEL Classification: G30, G34, J24, J31, J63

Suggested Citation

Tate, Geoffrey A. and Yang, Liu A., The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets (May 16, 2012). AFA 2012 Chicago Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1787776 or http://dx.doi.org/10.2139/ssrn.1787776

Geoffrey A. Tate

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 (Contact Author)

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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