"how integrating human capital facilitates or impedes firm adoption of a new technology" (Dissertation)

In my dissertation, I study technology adoption and human capital integration. When a firm adopts a new technology, the firm can exploit the full value of the technology only if a set of human capital beyond firm management learns to use the new technology and incorporates it into new products or processes  (Lanzolla & Suarez, 2012; Leonard-Barton & Deschamps, 1988; Rogers, 2003). I consider how the relevant human capital’s willingness to engage in this adaptation behavior may depend on whether they are integrated as employees of the firm, and I examine the implications for both the decision to adopt a new technology and its implementation. Empirically, I study hospitals’ decisions to adopt a new technology that requires physicians to adapt, and I examine how integrating physicians using an employment contract affects different stages of the technology adoption process.

In part one of my dissertation, I focus on the firm’s initial decision to adopt a new technology. My argument centers on the importance of the relevant human capital making what I call the adaptation investment: the investment in learning to use the new technology and making the necessary adjustments to roles and patterns of interpersonal interactions in order to incorporate the technology into a new process or product. I develop a framework in which firm management’s concerns about implementation, specifically about whether the relevant human capital will make the required adaptation investment, affect the timing of the adoption decision. I define the employment contract to be a contract in which firm management holds the decision rights over what tasks the human capital performs and how they should be performed, and I consider how holding those decision rights may or may not alleviate concerns about the adaptation investment in order to establish conditions under which firms who integrate human capital using an employment contract will adopt a new technology sooner than firms with non-integrated human capital. In doing so, I show how firms’ integration decisions can lead to different technology adoption decisions.

In part two of my dissertation, I examine the implementation of a new technology more closely. First, I distinguish between technologies for which the adaptation investment is expected to involve tasks inside or outside what I define to be the zone of indifference: the set of potential tasks for which employees will accept firm management’s authority to direct whether and how the tasks should be performed. Among firms with integrated human capital, I hypothesize that implementation of a new technology will be completed more quickly when the adaptation investment is expected to involve tasks inside the zone of indifference. Second, I examine conditions under which integrated human capital are more likely than non-integrated human capital to engage with a new technology immediately following initial firm adoption both for technologies for which the adaptation investment involves tasks inside the zone of indifference and technologies for which the adaptation investment involves tasks outside the zone of indifference. Third, I examine the effect of integrating human capital on the quality of implementation—the extent to which the firm is able to realize the expected value of the technology.

I test predictions about both the initial decision to adopt a new technology and its implementation in the context of hospital-physician integration and the adoption of two types of health information technology, where the adaptation investment required of one technology falls within the zone of indifference and the adaptation investment required of the other falls outside the zone of indifference. 

"You get what you pay for: how the rise of passive investing threatens risk-taking in r&D"

We examine how a firm's shareholders constrain or enable the pursuit of riskier, explorative approaches to R&D in publicly-held firms. In particular, we focus on the implications of the rise of the passive institutional investor. We hypothesize that firms with higher levels of passive ownership will be less likely to pursue risk-taking in R&D due to two mechanisms. First, passive investors are unlikely to monitor firm management in a way that supports exploration and experimentation. Shareholders monitor R&D investments by observing signals of managerial effort, and we argue that firms are less likely to take risks in R&D the noisier the signals pursued by shareholders. With their low fees and goal of tracking the targeted index, passive investors have neither the resources nor the incentive to pursue high-cost signals of managerial effort in their numerous portfolio firms. Instead, we argue, passive investors look for lower-cost yet noisier signals of managerial effort in the form of promoting best practices in corporate governance, such as independent boards and no anti-takeover provisions, which result in constrained risk-taking in R&D. Second, as nonstrategic noise traders, passive investors prefer their portfolio stocks maintain high liquidity to reduce trading costs, and therefore passive investors encourage more frequent disclosure of firm performance in the form of increased 8-K filings and more guidance from management on earnings. We argue that this frequent disclosure of firm performance further constrains risk-taking in R&D. We currently find support for these arguments in our empirical analysis of manufacturing firms, where we measure risk-taking in R&D in terms of the degree to which firm patents cite unfamiliar or emerging technologies. Thus, while passive funds have been hailed as the investment vehicle of choice for the smart retail investor, we identify an important consequence of the growing shift in ownership of publicly-held firms from active to passive investors.