The internal labor markets of business groups

Internal Capital Markets in Business Groups

Business groups are important in many countries. Several studies have looked at the performance and behavior of firms that are members of a business group. This paper looks at the issue in more detail and tries to answer some related questions. First, do business groups really have internal capital markets and do they provide efficient resource allocation (in a view of the controlling sharehold...

Large Firms and Internal Labor Markets

This paper introduces a model of internal labor markets that is consistent with the observed differences between workers in large and small firms with respect to wages and separation rates. In particular, firms constitute labor markets with no search frictions. Workers are free to move within a firm at no cost, whereas switching across firms is costly. If the quality of a match between a worker...

Managers, Mentoring, and Internal Labor Markets

We propose a theory of production and allocation of human capital in firms that focuses on the role of line managers, who both invest time to mentor junior employees, and acquire information about the juniors’abilities that is valuable for job assignments. We argue that this dual role of managers implies that internal labor markets and incentive contracts for managers must be determined jointly...

Internal Labor Markets and Manpower Analysis

Market Frictions and the Competitive Advantage of Internal Labor Markets

We show that frictions in labor and capital markets can be a source of competitive advantage for a¢ liates of corporate groups over standalone …rms in environments where bene…ts from internal markets’‡exibility are high. We argue that the advantage of ‡exibility in changing labor inputs is related to how di¢ cult it is to change capital inputs. We predict that if substituting labor with capital...