Worker Redeployment in Multi-Business Firms

Abstract

We examine to what extent and when multi-business firms internally redeploy workers between their units. Research has emphasized that resource redeployment creates value by allowing firms to escape from declining industries to those with better prospects. We find multiple patterns consistent with this mechanism. However, we also find, surprisingly, that more than half of all redeployments occur between establishments in the same five-digit industry. Moreover, redeployment is often not associated with business exit or diversification, but rather, the opening of new establishments in industries that are growing within the firm. We argue that these patterns are consistent with the theoretical notion of "internal inducements" to redeployment. Overall, our findings suggest redeployment creates value not only in the process of diversification but also horizontal growth.