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Using a large sample of diversified firms from 38 countries we investigate the influence of several national-level institutional factors or “institutional voids” on the value of corporate diversification. Specifically, we explore whether the presence of frictions in a country’s capital markets, labor markets, and product markets, affects the excess value of diversified firms. We find that the value of diversified firms relative to their single-segment peers is higher in countries with less-efficient capital and labor markets, but find no evidence that product market efficiency affects the relative value of diversification. These results provide support for the theory of internal capital markets that argues that internal capital allocation would be relatively more beneficial in the presence of frictions in the external capital markets. In addition, the results show that diversification can be beneficial in the presence of frictions in the labor market.

This chapter investigates the relationship between the composition of initial spinout teams and spinout survival. We develop a theory suggesting that spinout founders hiring from their prior firm versus hiring from the external labor market to assemble spinout teams will have differential effects on spinout survival. Using confidential employee–employer linked data in the legal services industry provided by the United States Census Bureau, we find evidence that inclusion of spinout team members from the founder's prior firm is positively related to spinout survival, a relationship which increases with included members' prior earnings. In contrast, we find that inclusion of spinout team members from firms outside the founder's prior firm is positively associated with spinout failure, a relationship which becomes statistically insignificant when included team members' prior earnings are high. Taken together, our results point to the potential hazards associated with using external markets to assemble spinout teams, thereby establishing an important boundary condition for extant theory which has focused on the benefits associated with spinout team size, but has often neglected the labor market strategy through which such teams are assembled.

This article attempts to bridge and contribute to three related lines of inquiry: the effect of economic organization on cultural diversity; the origins of career specialism; and the contrast between market and firm as alternative modes of governance. In particular, I use the natural experiment engendered by the transformation of Hollywood from the firm-based studio system to the contemporary market system to test the claim that typecasting-driven restrictions on generalist identities in an internal labor market are comparable in their significance to those found in the external labor market (Faulkner, 1983; Zuckerman, Kim, Ukanwa, & von Rittmann, 2003). Results support this claim and thereby suggest that incentives for experimentation by employers in internal labor markets counterbalance the greater control over work assignments enjoyed by independent contractors in the external labor market.

In this paper, we argue that work should be recognized as “commons.” We call for a new approach to how managers define their role and responsibility regarding the problem of work flexibility and of its societal implications. We argue that, in the global and digitized economy, it is in the best interest of all the company’s stakeholders that managers choose combinations of work arrangements and human resource policies considering the externalities of these decisions. Managers’ responsibility spans to the costs and risks that the broader social system of organizational stakeholders will bear because of their decisions. When labor market institutions are “thin,” it is management’s responsibility to contribute structuring and shaping them, so that the interests of workers, independent of the work arrangements, are considered.

Purpose – I suggest that we conceptualize labor markets as observable social networks, in which workplaces are the nodes and people moving between workplaces are the edges. The movement of people delivers the actionable information as to what the supply, demand, and going wage for labor might be. Labor market networks are hypothesized to be quite thin thus leading to substantial wage setting autonomy within workplaces, consistent with contemporary observations in both economics and sociology as to the weakness of labor market signals.Method – This paper reviews theoretical and empirical work in economics, sociology, and network science and develops a network image of labor market structure and function. Hypotheses derived from economic, sociological, and network theories are proposed to explain workplace-level wage setting.Findings – Information flow, trust in information, information variance, collusion, and status beliefs are all proposed as important network properties of labor markets. The paper outlines an observational strategy to make labor markets scientifically observable.Originality – Economists and sociologists often refer to labor markets as mechanisms setting the price of labor but rarely observe them. This paper outlines a strategy for making the invisible hand of the market scientifically observable.

The 1980s and 1990s at Stanford University were a uniquely productive era for research on organizations and labor markets. I describe three important, interconnected themes that characterize the research on organizations and labor markets that emerged from Stanford during this era: the central role of the firm in a multi-level system that determines labor market outcomes, the role of institutions in both creating and constraining labor market outcomes, and the dynamic, often unexpected, consequences of labor market outcomes. I describe the genesis and development of each theme and conclude by discussing what lessons can be learned from this era about creating an innovative and productive research culture.

We study career and wage dynamics within and between firms using a large linked employer-employee panel dataset spanning 26 years. We construct six-level hierarchies for more than 5,000 firms. We replicate most of the analyses from Baker, Gibbs, and Holmström (1994) and make some extensions. Many of our results corroborate their findings. Careers within firms are important, but the strong version of the theory of internal labor markets does not fit the data. Recent theories of career and wage dynamics explain our findings well.

Purpose – This chapter analyzes the effects that the international integration of product markets induced by globalization exerts on the direction of technological change at the industry level.

Methodology/approach – In order to do so it elaborates an interpretative framework that complements the classical inducement hypotheses with the Schumpeterian literature and the localized technological change approach, putting forward the hypothesis that technological change is biased by the dynamics of both factor and product markets. We argue and show that not only the changing levels of input costs but also the changing prevalence of product and process innovations affect the direction of technological change: specifically when product innovations prevail technological change is skill-biased, while when process innovations play a major role innovation is capital intensive.

Findings – Following this perspective we analyze the interindustrial variance of the output elasticities of labor of the main advanced economies in recent years and claim that such heterogeneity can be understood as the result of differentiated innovative reactions of firms to changes induced by the globalization of the markets: fast-growing sectors innovate mainly through (skilled) labor-augmenting technological change, while mature industries rely more on capital-enhancing innovations. The empirical evidence supports our hypotheses and shows that the variance of the output elasticity of labor in a panel data estimate across 17 manufacturing sectors in 16 OECD countries from 1995 to 2006, is significantly and positively associated with the rates of growth of employment, wage levels and their rates of increase, and R&D intensity.

Originality/value of paper – By investigating the variance of output elasticities at the industry level the chapter provides new insights within the literature focused on the bias of technological change.

Scholars have argued that changes in the U.S. corporate economy in recent decades transformed labor market institutions in revolutionary ways. Although there is a fair amount of evidence in support of these claims, other studies suggest that labor market change in this period was more gradual. This paper synthesizes research from multiple disciplines to assess whether the transformation of two main labor market structures – closed employment relationships associated with internal labor markets (ILMs), and job structures within these ILMs – was revolutionary or evolutionary in recent decades. It then specifies implications of the labor market transformation process for human resource management (HRM), and concludes by suggesting avenues for future research.

Personnel economics tends be based on single-firm case studies. Here, we examine several internal labor market dimensions of nearly 5,000 firms, over a period of 20 years, using detailed matched employer–employee data from Portugal. In the spirit of Baker, Gibbs, and Holmstrom (1994a, 1994b), we consider worker turnover, the role of job levels and human capital as wage determinants, wage dispersion within job levels, the importance of tenure in promotions and exits, and the scope for careers. We find a large degree of diversity in most of these personnel dimensions across firms. Moreover, some dimensions are shown to be robust predictors of firm performance, even after controlling for time-invariant firm heterogeneity and other variables. These dimensions include low worker churning, the importance of careers, low wage dispersion at low and intermediate job levels, and a tight relationship between human capital variables and wages.