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Skill relatedness and firm diversification

Neffke, Frank and Henning, Martin LU (2013) In Strategic Management Journal 34(3). p.297-316
Abstract
Because of the importance of human capital, a firm's choice of diversification targets will depend on whether these targets offer opportunities for leveraging existing human resources. We propose to quantify the similarity of different industries' human capital or skill requirements, that is, the industries' skill relatedness, by using information on cross-industry labor flows. Labor flows among industries can be used to identify skill relatedness, because individuals changing jobs will likely remain in industries that value the skills associated with their previous work. Estimates show that firms are far more likely to diversify into industries that have ties to the firms' core activities in terms of our skill-relatedness measure than... (More)
Because of the importance of human capital, a firm's choice of diversification targets will depend on whether these targets offer opportunities for leveraging existing human resources. We propose to quantify the similarity of different industries' human capital or skill requirements, that is, the industries' skill relatedness, by using information on cross-industry labor flows. Labor flows among industries can be used to identify skill relatedness, because individuals changing jobs will likely remain in industries that value the skills associated with their previous work. Estimates show that firms are far more likely to diversify into industries that have ties to the firms' core activities in terms of our skill-relatedness measure than into industries without such ties or into industries that are linked by value chain linkages or by classification-based relatedness. Copyright (C) 2012 John Wiley & Sons, Ltd. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
diversification, relatedness, human capital, labor flows, skills
in
Strategic Management Journal
volume
34
issue
3
pages
297 - 316
publisher
John Wiley & Sons
external identifiers
  • wos:000313905200003
  • scopus:84872807432
ISSN
0143-2095
DOI
10.1002/smj.2014
language
English
LU publication?
yes
id
26201322-e8b4-461a-a116-eb48abd9f7d9 (old id 3577152)
date added to LUP
2013-03-25 10:13:37
date last changed
2019-04-10 01:58:50
@article{26201322-e8b4-461a-a116-eb48abd9f7d9,
  abstract     = {Because of the importance of human capital, a firm's choice of diversification targets will depend on whether these targets offer opportunities for leveraging existing human resources. We propose to quantify the similarity of different industries' human capital or skill requirements, that is, the industries' skill relatedness, by using information on cross-industry labor flows. Labor flows among industries can be used to identify skill relatedness, because individuals changing jobs will likely remain in industries that value the skills associated with their previous work. Estimates show that firms are far more likely to diversify into industries that have ties to the firms' core activities in terms of our skill-relatedness measure than into industries without such ties or into industries that are linked by value chain linkages or by classification-based relatedness. Copyright (C) 2012 John Wiley & Sons, Ltd.},
  author       = {Neffke, Frank and Henning, Martin},
  issn         = {0143-2095},
  keyword      = {diversification,relatedness,human capital,labor flows,skills},
  language     = {eng},
  number       = {3},
  pages        = {297--316},
  publisher    = {John Wiley & Sons},
  series       = {Strategic Management Journal},
  title        = {Skill relatedness and firm diversification},
  url          = {http://dx.doi.org/10.1002/smj.2014},
  volume       = {34},
  year         = {2013},
}