Title: Internal Labor Markets and Diversification Strategies in Financial Services
Abstract: This paper assesses the fit between firm-level Internal Labor Markets (ILMs) and firm diversification in the U.S. financial
services sector. The sector comprises a number of related sub-industries and recent deregulation has allowed firms to
construct increasingly diversified portfolios of activities across these sub-industries. Recent deregulation, particularly in
banking, has also loosened geographic restrictions on firm activities. Drawing on the “resource-based view” of firm strategy,
we hypothesize that firms with stronger ILMs are more likely to diversify. We find support for this view in analysis of data
from the Longitudinal Household-Employer Dynamics program matched to the Longitudinal Business Database. Firms
with lower net turnover, lower wage dispersion, and greater opportunities for workers inside the firm tend to be those that
diversify more subsequently.
Publication Year: 2007
Publication Date: 2007-01-01
Language: en
Type: article
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