Exploiting Growth Opportunities: The Role of Internal Labour Markets

Giacinta Cestone, Chiara Fumagalli, Francis Kramarz () and Giovanni Pica

The Review of Economic Studies, 2024, vol. 91, issue 5, 2676-2716

Abstract: We explore how business groups use internal labour markets (ILMs) in response to changing economic conditions. We show that following the exit of a large industry competitor, group-affiliated firms expand, and gain market share by increasing their reliance on the ILM to ensure swift hiring, especially of technical managers and skilled blue collar workers. The ability to take advantage of this shock to growth opportunities is greater in firms with closer access to their affiliates’ human capital, as geographical proximity facilitates employee relocations across units. Overall, our findings point to the ILM as a prominent mechanism making affiliation with a business group valuable at times of change. For the ILM to perform its role in the face of industry shocks, group sectoral diversification must be combined with geographical proximity between affiliates.

Keywords: Business groups; Human capital; Labour market frictions; Internal labour markets (search for similar items in EconPapers)
Date: 2024
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Working Paper: Exploiting Growth Opportunities: The Role of Internal Labor Markets (2023)
Working Paper: Exploiting Growth Opportunities:The Role of Internal Labor Markets (2023)
Working Paper: Exploiting Growth Opportunities: The Role of Internal Labor Markets (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:91:y:2024:i:5:p:2676-2716.

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