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An Integral Choice? Exploring Human Capital Integration as an Antecedent of Technology Investment

Subject

Strategy and Entrepreneurship

Publishing details

Working Paper

Authors / Editors

Troyer C

Biographies

Publication Year

2021

Abstract

How to structure relationships with human capital and whether and when to invest in new technologies are two strategic decisions that are increasingly important for firm managers. I explore how these two decisions are related by examining human capital integration as an antecedent of technology investment. By focusing on the individuals whose human capital the firm will need to create value from a new technology rather than the individuals whose human capital has been rendered obsolete by a new technology, I establish novel contingencies for when firms that have integrated human capital are more likely to invest in a new technology than firms that have not integrated human capital. Leveraging variation in state laws prohibiting hospitals from employing physicians, I analyze how technology investment decisions of U.S. hospitals depend on whether hospitals have integrated physicians as employees or kept them at arm’s-length. I find support for the notion that the effect of human capital integration on technology investment is contingent in its nature. I find a stronger positive association between integration and technology investment for more radical technologies that require fundamentally new knowledge and skill. However, even for more radical technologies, integration becomes less relevant as an antecedent of technology investment as competition for physicians declines and the technologies diffuse.

Series

Working Paper

Available on ECCH

No


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