The Role of Firms in Job Creation and Destruction in U.S. Manufacturing
Research in recent years has documented extensively the fact that labor markets are characterized by large and pervasive flows of jobs among places of employment. However, virtually none of this research pertains to the role of the firm and its decisions in determining job creation and destruction. Previous research and data-gathering efforts have focused on employment at individual physical locations called establishments, or plants. This neglect leaves fundamental questions regarding the role of firms unanswered. Job reallocation occurring within firms may have very different causes and consequences from that occurring between firms.
In this article the authors provide initial results from their ongoing study of the role of firms and corporate reorganization in the determination of job creation and destruction. Their results are striking: Most job flows are between firms for small firms, but intrafirm flows dominate for very large firms. Most plants are in volatile small firms, but employment is concentrated mainly in relatively stable large firms. While the small-firm sector seems to be in constant flux, the large manufacturing firm sector appears to operate in a relatively steady, and perhaps planned fashion.