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

Geoffrey Tate and Liu Yang

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Internal labor markets facilitate cross-industry worker reallocation and collaboration, and the resulting benefits are largest when the markets include industries that utilize similar worker skills. We construct a matrix of industry pair-wise human capital transferability using information obtained from more than 11 million job changes. 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 they exploit the real option to move workers from the target firm 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 (search for similar items in EconPapers)
JEL-codes: G34 J24 J62 M51 M54 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015-09
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://www2.census.gov/ces/wp/2015/CES-WP-15-31.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:15-31

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