Week 11_Tambe and Hitt (2014)_Jung Kwan Kim

Tambe and Hitt (2014) examine the IT spillovers by labor mobility by drilling down its impact on IT productivity with various robustness checks. More specifically, the authors aim to understand the positive relationship between the flow of technological know-how by employee mobility and the IT-backed performance.

The one and only hypothesis is: “The IT investments of other firms generate productivity spillovers through IT labor flows among firms.” The rationales are rather straightforward. First, new employees bring previously accumulated knowledge from other firms to a hiring firm. Especially, since the hands-on experience on new technology is an effective channel for knowledge dissemination, the newly hired workers from other firms with high IT intensity are particularly valuable. Thus, an abundant pool of IT labor naturally leads to better productivity spillovers for firms which accept new hires from the labor pool.

Based on an extensive set of empirical analyses, the authors support that IT labor flows explain a significant chunk of variation in IT returns, roughly 20% of the elasticity on IT investment. This finding is turned out to consistent with controlling the wage for IT workers, the unobserved demand and productivity, the geographic proximity, and the influx of labor from prominent IT firms. The empirical supports collectively imply that the influx of labor forces from IT-intensive firms is important in a managerial perspective and that securing labor flexibility is a critical responsibility of policy makers.

All in all, labor mobility matters for performance in IT.