The benefits of internal labor markets are largest when they include industries that utilize similar worker skills, facilitating cross-industry worker reallocation and collaboration. We show that diversifying acquisitions occur more frequently among industry pairs with higher human capital...

The benefits of internal labor markets are largest when they include industries that utilize similar worker skills, facilitating cross-industry worker reallocation and collaboration. We show that diversifying acquisitions occur more frequently among industry pairs with higher human capital...

We document a strong decline in corporate-diversification activity since the late 1970's, and we develop a dynamic model that explains this pattern, both qualitatively and quantitatively. The key feature of the model is that synergies endogenously decline with technological specialization,...