Skill-relatedness and firm diversification

The concept of “relatedness” between industries plays an increasingly central role in economics andstrategic management. However, relatedness has remained rather elusive in empirical terms. In thisarticle, we investigate relatedness between industries in terms of the extent to which the same humancapital can be employed in different industries. In particular, we investigate the skill-relatedness amongdifferent industries by investigating labor flows between industries.The data used are Swedish employer linked data on individuals. Our statistical framework assesses thedegree to which labor flows between pairs of industries are in excess of expected levels and use this as aquantification of Revealed Skill Relatedness.[...]