The Robot Revolution: Managerial and Employment Consequences for Firms

70 Pages Posted: 19 Jul 2019 Last revised: 18 Jun 2020

See all articles by Jay Dixon

Jay Dixon

Statistics Canada

Bryan Hong

Henry W. Bloch School of Management, University of Missouri-Kansas City

Lynn Wu

University of Pennsylvania - The Wharton School

Date Written: June 3, 2020

Abstract

As a new general-purpose technology, robots have the potential to radically transform employment and organizations. In contrast to prior studies that predict dramatic employment declines, we find that investments in robotics are associated with increases in total firm employment, but decreases in the total number of managers. Similarly, we find that robots are associated with an increase in the span of control for supervisors remaining within the organization. We also provide evidence that robot adoption is not motivated by the desire to reduce labor costs, but is instead related to improving product and service quality. Our findings are consistent with the notion that robots reduce variance in production processes, diminishing the need for managers to monitor worker activities to ensure production quality. As additional evidence, we also find robot investments predict improved performance measurement and increased adoption of incentive pay based on individual employee performance. With respect to changes in skill composition within the organization, robots predict decreases in employment for middle-skilled workers, but increases in employment for low- and high-skilled workers. We also find robots not only predict changes in employment, but also corresponding adaptations in organizational structure. Robot investments are associated with both centralization and decentralization of decision-making authority depending upon the task, but decision rights in either case are reassigned away from the managerial level of the hierarchy. Overall, our results suggest that robots have distinct and profound effects on employment and organizations that require fundamental changes in firm practices and organizational design.

Keywords: Robot, AI, Employment, Productivity, Organizational Change

Suggested Citation

Dixon, Jay and Hong, Bryan and Wu, Lynn, The Robot Revolution: Managerial and Employment Consequences for Firms (June 3, 2020). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3422581 or http://dx.doi.org/10.2139/ssrn.3422581

Jay Dixon

Statistics Canada ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada

Bryan Hong

Henry W. Bloch School of Management, University of Missouri-Kansas City ( email )

5110 Cherry St
Kansas City, MO 64110
United States

Lynn Wu (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3733 Spruce Street
Philadelphia, PA 19104-6374
United States

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