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

 In my dissertation, I study inter- and intra-organizational diffusion of new technologies. I examine how integrating human capital affects both a firm's decision to adopt a new technology and its implementation, where I define human capital to be integrated if their relationship with the firm is governed by an employment contract. I specifically focus on the integration of the set of human capital who will be required to learn how to use the relevant new technology and incorporate it into new products or processes. My goals are twofold. The first is to develop a framework for evaluating the effect of integrating human capital on the decision to adopt a new technology that accounts for both influence activity undertaken by the relevant human capital and decision-makers' expectations about resistance to implementation. The second is to establish contingencies for when the influence costs and the adaptive advantages that are each commonly associated with hierarchy and integration emerge in ways that have implications for technology adoption and implementation.

To examine the effect of integration on the decision to adopt a new technology, I consider both the role of influence activity and the role of expectations about the ease of implementationOne prediction that emerges from prior literature is that integrating human capital may delay adoption because the slower decision-making processes and influence activities that are commonly associated with hierarchy make firms more likely to promote the status quo and less likely to pursue novel or uncertain projects. On the other hand, it is reasonable to presume that expectations about the implementation of the new technology may affect the decision to adopt, where firm management may be less likely to invest in a new technology when the relevant human capital is expected to resist engaging in the necessary adaptive behavior. Standard presumptions ascribing adaptive advantages to integration and hierarchy would suggest that integrating human capital should facilitate implementation, leading to a competing prediction that firms with integrated human capital would be likely to invest in a new technology sooner. To reconcile these two predictions, I develop a framework organized around Barnard's construct of the "zone of indifference." I hypothesize that when the adaptive behavior required by a new technology is expected to be inside the zone of indifference, firms with integrated human capital are likely to adopt sooner as expectations about implementation are favorable and influence activity from the relevant human capital is low. But when expectations that the adaptive behavior will be outside the zone of indifference become stronger, I hypothesize that the speed advantage of integrating human capital weakens as expectations about implementation become less favorable and influence activity increases. Thus, in addition to generating predictions for the effect of integrating human capital on the decision to adopt a new technology, my framework articulates a mechanism for how and when expectations about implementation influence the decision to adopt a new technology; although both the decision to adopt a new technology and its implementation are intricately connected, studies of technology adoption or technology diffusion rarely account for how expectations about the latter may influence the former. Finally, I revisit fundamental assumptions about the influence activity associated with integration, providing contingencies for when we should expect it to be relevant for the technology adoption decision.

In my analysis of the implementation of a new technology, I further examine the limitations of assuming integration lends an adaptive advantage. I argue that the adaptive advantage attributed by Williamson and Simon to integrating human capital as employees is predicated on the assumption that the necessary adaptive behavior falls within the zone of indifference.  In that case, firm management can direct by fiat the behavior of employees without having to renegotiate a new contract, meaning firm management can simply direct integrated employees to engage in the necessary adaptive behavior. However, when the adaptive behavior falls outside the zone of indifference, I hypothesize that the success of implementation depends on the opportunity costs of adaptive behavior, organizational commitment, and the payoff associated with developing firm-specific skills. These three mechanisms are not necessarily exclusive to the employment relationship, and when these mechanisms operate on non-integrated human capital, I hypothesize that the adaptive advantage of integrating human capital shrinks. Finally, I argue that there can be a discrepancy between expectations about whether the necessary adaptive behavior will fall within the zone of indifference and whether the necessary adaptive behavior ultimately falls outside the zone of indifference, resulting in unexpected resistance to implementation from the relevant human capital.

I test predictions about both the 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 adaptive behavior required of one technology falls within the zone of acceptance and the adaptive behavior required of the other falls outside the zone of acceptance.

"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.