Human Capital Acquisition in Response to Data Breaches

56 Pages Posted: 18 Mar 2021 Last revised: 26 Jul 2022

See all articles by Sarah Bana

Sarah Bana

Stanford University; Chapman University - The George L. Argyros School of Business & Economics

Erik Brynjolfsson

National Bureau of Economic Research (NBER); Stanford

Wang Jin

Stanford Digital Economy Lab

Sebastian Steffen

Boston College - Carroll School of Management; Stanford Digital Economy Lab (S-DEL); Massachusetts Institute of Technology (MIT) - Initiative on the Digital Economy; MIT Sloan School of Management

Xiupeng Wang

Boston University; Stanford Digital Economy Lab

Date Written: July 25, 2022

Abstract

Do firms react to data breaches by investing in cybersecurity talent? Or, are they more likely to invest in talent that helps protect their public image or tackle the legal aftermath? In other words, do they treat the root cause of the vulnerability through substantive human capital investments or do they treat the symptoms through symbolic ones (or both)? Combining unique information on data breach events and detailed firm-level job posting data, we leverage a difference-in-differences (DiD) design and show that firms increase their hiring by two percentage points for both cybersecurity as well as public relations and legal workers after suffering a breach, with important heterogeneity by firm type and industry. Using data on media and online search attention around data breaches, we further show that public scrutiny serves as an effective mechanism to encourage relatively more substantive human capital investment and thus helps to better align firms' incentives with those of the public. Given the increase in volume and severity of cyberattacks, our findings demonstrate the heterogeneous hiring responses across firms, industries, and different levels of public scrutiny, and provide guidance on how policymakers and the general public can incentivize firms to more substantively safeguard customers' data.

Keywords: Cybersecurity, Data Breaches, Substantive and Symbolic Adoption, Human Capital Acquisition, Media and Public Attention, Value of Data and Privacy

JEL Classification: D83, L86, K24, J24

Suggested Citation

Bana, Sarah and Brynjolfsson, Erik and Jin, Wang and Steffen, Sebastian and Wang, Xiupeng, Human Capital Acquisition in Response to Data Breaches (July 25, 2022). Available at SSRN: https://ssrn.com/abstract=3806060 or http://dx.doi.org/10.2139/ssrn.3806060

Sarah Bana

Stanford University ( email )

Stanford, CA 94305
United States

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Erik Brynjolfsson

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stanford ( email )

366 Galvez St
Stanford, CA 94305
United States

HOME PAGE: http://brynjolfsson.com

Wang Jin

Stanford Digital Economy Lab ( email )

Stanford, CA 94305
United States

Sebastian Steffen

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

HOME PAGE: http://www.bc.edu/bc-web/schools/carroll-school/faculty-research/faculty-directory/sebastian-steffe

Stanford Digital Economy Lab (S-DEL) ( email )

210 Panama St.
Cordura Hall
Stanford, CA 94305
United States

Massachusetts Institute of Technology (MIT) - Initiative on the Digital Economy ( email )

245 First Street
Cambridge, MA 02142
United States

MIT Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

HOME PAGE: http://sebastiansteffen.com/

Xiupeng Wang (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Stanford Digital Economy Lab ( email )

Stanford, CA 94305
United States

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