Skill-relatedness and firm diversification
According to the knowledge-based view of the firm, a firm’s workforce is its most important resource, and firms often diversify into activities that allow them to leverage human resources. Human capital also represents a main asset for employees. When switching jobs, individuals are expected to remain in industries that value the skills that they have developed in their previous work. Based on this observation, this article develops theoretical arguments and a statistical method that uses cross-industry labor flows to assess the skill-relatedness between industries. Industries classified in different sectors of the economy sometimes exhibit strong skill-relatedness linkages. Also, industry space, i.e., the resulting network that connects industries with overlapping skill requirements, is highly predictive of diversification moves on the part of firms. Diversification is found to be over 100 times more likely to occur into industries that have ties to a firm’s core activity in terms of skills than into industries that do not. This effect of skill-relatedness eclipses the effect of other types of relatedness, such as value chain linkages and classification-based relatedness.
|Date of creation:||Jun 2009|
|Date of revision:||Oct 2010|
|Contact details of provider:|| Postal: |
Web page: http://www.uni-marburg.de/fb19/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
- Michael Gort, 1962. "Diversification and Integration in American Industry," NBER Books, National Bureau of Economic Research, Inc, number gort62-1, June.
- Maliranta, Mika & Nikulainen, Tuomo, 2008. "Labour Force Paths as Industry Linkages: A Perspective on Clusters and Industry Life Cycles," Discussion Papers 1168, The Research Institute of the Finnish Economy.
- Koen Frenken & Frank Van Oort & Thijs Verburg, 2007. "Related Variety, Unrelated Variety and Regional Economic Growth," Regional Studies, Taylor & Francis Journals, vol. 41(5), pages 685-697.
- Frank Neffke & Martin Svensson Henning & Ron Boschma, 2008. "Surviving in agglomerations: Plant evolution and the changing benefits of the local environment," Papers in Evolutionary Economic Geography (PEEG) 0820, Utrecht University, Section of Economic Geography, revised Dec 2008.
- David J. Bryce & Sidney G. Winter, 2009.
"A General Interindustry Relatedness Index,"
INFORMS, vol. 55(9), pages 1570-1585, September.
- Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
- Lemelin, Andre, 1982. "Relatedness in the Patterns of Interindustry Diversification," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 646-57, November.
- Maxim Poletaev & Chris Robinson, 2008.
"Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys 1984-2000,"
University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers
20083, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
- Maxim Poletaev & Chris Robinson, 2008. "Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984-2000," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 387-420, 07.
- Montgomery, Cynthia A. & Hariharan, S., 1991. "Diversified expansion by large established firms," Journal of Economic Behavior & Organization, Elsevier, vol. 15(1), pages 71-89, January.
- Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
- Breschi, Stefano & Lissoni, Francesco & Malerba, Franco, 2003. "Knowledge-relatedness in firm technological diversification," Research Policy, Elsevier, vol. 32(1), pages 69-87, January.
- Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.
- Frank Neffke & Martin Svensson Henning, 2008.
"Revealed Relatedness: Mapping Industry Space,"
Papers in Evolutionary Economic Geography (PEEG)
0819, Utrecht University, Section of Economic Geography, revised Dec 2008.
- C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
- Teece, David J., 1982. "Towards an economic theory of the multiproduct firm," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 39-63, March.
- Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
When requesting a correction, please mention this item's handle: RePEc:esi:evopap:2009-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christoph Mengs)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.