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Evolution of Firm Organization ∗

By  and Kenn Ariga and Kenn Ariga


This paper investigates interactions among horizontal transfer, promotions across ranks, and creations and destructions of jobs inside a large Japanese manufacturing firm. In this sample firm, we find that job destructions and creations accounts for the majority of horizontal transfers of employees within the firm. This is in sharp contrast to a popular perception that employees move according to a well-defined career path in a stable organization with internal labor market. Instead, we find that units and jobs are constantly created and destructed at this firm and that individual career paths are far more dynamic, and, state and path dependent. The econometric analysis on determinants of promotion policy confirm these findings, as well as predictions based on multi-skilling model of human capital. First of all, transfers to a functionally similar units which enable employee to acquire multiple skills do enhance the promotion probability. On the other hand, transfers to functionally or geographically different units are often detrimental to the promotion prospect, especially those at earlier stage of career. In general, an employee career at this firm is significantly influenced by the success and failure of units, and, in particular, we find that promotion probability for some type of employees is significantly higher for those transferred from destructed sections, and also for those transferred into newly created sections

Year: 2003
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