Week 2-Reading Summary-Jack Tong

Paper: Rawley, Evan, and Timothy S. Simcoe. “Information technology, productivity, and asset ownership: Evidence from taxicab fleets.” Organization Science 24, no. 3 (2013): 831-845.

The authors examine how technology adoption impacts firm’s vertical integration and worker’s skills. The paper applies a formal productivity-based theory of asset ownership and tests it by measuring the impact of information technology adoption on asset ownership in the taxicab industry. The authors posit that improvements in technology lead to increased integration and a greater reliance on unskilled labor.

There are three types of organizations in the proposed model: 1. independent owner-operators; 2. fleet-affiliated drivers who own a car but contract for dispatching; 3. shift drivers who rent both a car and dispatching service from a fleet. The empirical results show that adopting a computerized dispatching system causes taxicab firms to increase the percentage of vehicles they own from affiliated drivers.

This paper contributes to two streams of literatures: firm-boundary and skill-biased technical change. The paper provides a theory-based model and empirical results that technology adoption causes firms to increasingly vertically integrate, even without changes in asset specificity. Moreover, the paper also provide additional support on the limitation to the standard skill-biased technical change hypothesis that information technology typically increases the demand for skilled labor.