Getting It To Work
More to Lose: The Adverse Effect of High Performance Ranking on Employees' Preimplementation Attitudes Toward the Integration of Powerful AI Aids
Ilanit SimanTov-Nachlieli
Organization Science, forthcoming
Abstract:
Despite the growing availability of algorithm-augmented work, algorithm aversion is prevalent among employees, hindering successful implementations of powerful artificial intelligence (AI) aids. Applying a social comparison perspective, this article examines the adverse effect of employees' high performance ranking on their preimplementation attitudes toward the integration of powerful AI aids within their area of advantage. Five studies, using a weight estimation simulation (Studies 1-3), recall of actual job tasks (Study 4), and a workplace scenario (Study 5), provided consistent causal evidence for this effect by manipulating performance ranking (performance advantage compared with peers versus no advantage). Studies 3-4 revealed that this effect was driven in part by employees' perceived potential loss of standing compared with peers, a novel social-based mechanism complementing the extant explanation operating via one's confidence in own (versus AI) ability. Stronger causal evidence for this mechanism was provided in Study 5 using a "moderation-of-process" design. It showed that the adverse effect of high performance ranking on preimplementation AI attitudes was reversed when bolstering the stability of future performance rankings (presumably counteracting one's concern with potential loss of standing). Finally, pointing to the power of symbolic threats, this adverse effect was evident both in the absence of financial incentives for high performance (Study 1) and in various incentive-based settings (Studies 2-3). Implications for understanding and managing high performers' aversion toward the integration of powerful algorithmic aids are discussed.
Aggressive Pivots and Entrepreneurial Skill
Xuelin Li & Martin Szydlowski
American Economic Journal: Microeconomics, forthcoming
Abstract:
We study pivots as signaling devices in a dynamic experimentation model. An entrepreneur receives funding from an investor and has private information about a project, which requires costly experimentation to succeed. The entrepreneur has a real option to pivot, i.e. to abandon the project and to start a new one. Investors learn about the project from the arrival of exogenous information and from the entrepreneur's pivoting decisions. We characterize signaling equilibria in which high skill entrepreneurs pivot early. Such early pivots are associated with higher likelihood of success and with more favorable funding terms following the pivot.
High-Growth Firms in the United States: Key Trends and New Data Opportunities
Daniel Kim et al.
Federal Reserve Working Paper, September 2024
Abstract:
Using administrative data from the U.S. Census Bureau, we introduce a new public-use database that tracks activities across firm growth distributions over time. With these new data, we uncover several key trends for high-growth firms -- critical engines of innovation and economic growth. First, the share of firms that are high-growth has steadily decreased over the past four decades, driven not only by falling rates of entrepreneurship but also languishing growth among existing firms. Second, this decline is particularly pronounced among young and small firms, while the share of high-growth firms has been relatively stable among large and old firms. We also find rich variation across states and sectors. To facilitate future research, we highlight how these data can be used to address various research questions.
Do Firms Value Court Enforceability of Noncompete Agreements? A Revealed Preference Approach
Takuya Hiraiwa, Michael Lipsitz & Evan Starr
Review of Economics and Statistics, forthcoming
Abstract:
Do firms value court enforceability of their workers' noncompete agreements (NCAs)? We leverage a 2020 Washington law that made NCAs unenforceable for workers earning less than $100k per year. If firms value the ability to enforce NCAs in court, then they should give just-below threshold workers raises to reach the threshold, resulting in excess mass just above the threshold. Using administrative data, we find no evidence of bunching, even where efficiency arguments are most plausible. A survey of Washington employment attorneys suggests little bunching because firms rarely need to enforce NCAs and because firms can use other, less restrictive alternatives.
Need for Speed: Quality of Innovations and the Allocation of Inventors
Santiago Caicedo & Jeremy Pearce
Federal Reserve Working Paper, October 2024
Abstract:
This paper studies how the speed-quality tradeoff in innovation interacts with firm dynamics, concentration, and economic growth. Empirically, we document long-run trends in the increasing speed of innovation alongside declining quality at large firms. Leveraging variation from an exogenous policy change, we document the existence of the speed-quality tradeoff both at the firm and aggregate level. We develop an endogenous growth model that incorporates the speed-quality tradeoff and show that allocating less labor towards speed increases growth, particularly in the presence of private benefits to innovation and spillovers from heterogeneous innovations. We quantify the model to link firms' decisions across speed and quality to aggregate outcomes. Quantitatively, the recent growth slowdown is mainly due to changes in the innovation production function, while the allocation of inventors between speed and quality within firms has a modest impact. When spillovers across firms are taken into account, the effect becomes significantly larger; the shift to speed over the last 30 years explains up to one-quarter of the decrease in growth.
Out of sight, out of mind: How high-level construals can decrease the ethical framing of risk-mitigating behavior
Salvatore Affinito, David Hofmann & Jonathan Keeney
Journal of Applied Psychology, forthcoming
Abstract:
Organizational failures often cause significant harm to employees, the organization itself, and the environment. Investigations of failures consistently highlight how key employees behaved in (perhaps unintentionally) unethical ways that de-prioritized safety, such as investing fewer resources in safety (vs. other priorities) over time. Drawing on these investigations, we suggest a previously underexplored theme could explain why organizational failures persist and why employees did not "see" the potential for their behaviors to cause harm to others: Employees were distanced from where the harm eventually occurred, either in terms of space (e.g., being located miles away from the job site) or time (e.g., making decisions that would not have impacts for months or years). We use construal level theory to investigate how the way employees construe where work occurs -- defined as work context construal -- influences perceptions of harm and the ethical framing of risk-mitigating behaviors. We hypothesize that high-level (abstract) work context construals (vs. low-level, concrete ones) reduce perceptions of potential harm which, in turn, leads to framing risk-mitigating behaviors as less of an ethical obligation. Six studies -- a correlational survey of aviation employees (Study 1), field experiments with offshore drilling employees (Study 2A) and health care workers (Study 2B), a preregistered experiment with nurses (Study 3), and two supplemental studies (Studies 4A/B) -- support our hypotheses. We discuss implications of this research for understanding organizational failures, particularly in a world where technology increasingly enables employees to monitor complex and high-risk work occurring many miles away, or on the other side of the world.
Worker Empowerment and Subjective Evaluation: On Building an Effective Conflict Culture
Bentley MacLeod, Victoria Valle Lara & Christian Zehnder
Management Science, forthcoming
Abstract:
Although conflicts typically lead to a waste of resources, organizations may still benefit from a corporate culture that tolerates or even encourages conflicts. The reason is that coordinated conflicts may help to enforce norms and foster cooperation. In this paper, we report results of a series of laboratory experiments designed to explore whether and under what conditions an efficiency-enhancing conflict culture can emerge. Using a principal-agent setup with subjective performance evaluation, we show that establishing a functional conflict culture is a delicate matter. If conflicts are encouraged in a careless hands-off manner, the destructive side of conflicts is likely to dominate. To be successful, a conflict culture requires a careful management of fairness norms. In our experiment, we find that conflicts have positive net effects on efficiency only if an explicit code of conduct is established and conflicts are institutionalized through a grievance process. Thus, providing workers with more power may be a necessary but not sufficient condition for improving productivity when performance evaluations are subjective.
Auditor Skill Demands and Audit Quality: Evidence from Job Postings
Charles Ham et al.
Management Science, forthcoming
Abstract:
This study empirically examines the relation between audit quality and auditors' cognitive and social skills. Using a novel data set of online job postings by accounting firms, we document substantial variation in the stated demand for auditors' cognitive and social skills, suggesting that audit offices are not homogeneous in their preferences for such skills. We find a positive relation between audit quality and the prevalence of cognitive and social skills within an audit office's job postings. This association is stronger for audit engagements that are more complex or require greater coordination, suggesting that cognitive and social skills are particularly important in engagements where effective communication and knowledge transfer, as well as sound professional judgment and skepticism, are needed. The association is also stronger for audit offices with greater investments in new technology, consistent with the complementary relation between cognitive and social skills and the use of technology. Overall, our study offers empirical evidence linking specific auditor skills to audit quality.