Ai Adoption and System-Wide Change

20 Pages Posted: 17 May 2021 Last revised: 18 Nov 2021

See all articles by Ajay K. Agrawal

Ajay K. Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Joshua Gans

University of Toronto - Rotman School of Management

Avi Goldfarb

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 2021

Abstract

Analyses of AI adoption focus on its adoption at the individual task level. What has received significantly less attention is how AI adoption is shaped by the fact that organisations are composed of many interacting tasks. AI adoption may, therefore, require system-wide change which is both a constraint and an opportunity. We provide the first formal analysis where multiple tasks may be part of a modular or non-modular system. We find that reliance on AI, a prediction tool, increases decision variation which, in turn, raises challenges if decisions across the organisation interact. Modularity, which leads to task independence rather than system-level inter-dependencies, softens that impact. Thus, modularity can facilitate AI adoption. However, it does this at the expense of synergies. By contrast, when there are mechanisms for inter-decision coordination, AI adoption is enhanced when there is a non-modular environment. Consequently, we show that there are important cases where AI adoption will be enhanced when it can be adopted beyond tasks but as part of a designed organisational system.

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Suggested Citation

Agrawal, Ajay K. and Gans, Joshua and Goldfarb, Avi, Ai Adoption and System-Wide Change (May 2021). NBER Working Paper No. w28811, Available at SSRN: https://ssrn.com/abstract=3847556 or http://dx.doi.org/10.2139/ssrn.3847556

Ajay K. Agrawal (Contact Author)

University of Toronto - Rotman School of Management ( email )

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National Bureau of Economic Research (NBER)

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Joshua Gans

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Avi Goldfarb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)

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