The benefits of internal labor markets are largest when they include industries that utilize similar worker skills, thereby facilitating cross-industry worker reallocation and collaboration. We show that diversifying acquisitions occur more frequently among industry pairs with higher human capital transferability. Such acquisitions result in larger labor productivity gains and are less often undone in subsequent divestitures. Moreover, acquirers retain more high-skill workers and more often transfer workers to jobs in other industries inside the merged firm. Overall, our results link human capital reallocation with the value created by corporate diversification and provide an explanation for seemingly unrelated acquisitions.

We compare the growth and responsiveness to demand shocks of post-initial public offering (IPO) firms and their private counterparts. Using multiple measures of myopia and multiple ways to match IPO firms with private firms, we do not find evidence of myopic behavior by public firms. IPO firms respond more to investment opportunities and have higher productivity in their early public years. Our results on public firms’ sensitivity to growth opportunities hold under several robustness tests, including when we consider firms’ total growth including acquisitions. The results show the importance of matching public to private firms early in their life.