Week11_Pierce(2015)_Ada

Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity

Motivation:

Employee theft and fraud are widespread problems in firms. A growing empirical literature on forensic economics has clarified when and how theft and other misconduct occur, but says little about the overall impact of firms’ use of forensics to monitor and reduce theft.  This is a critical shortfall in the literature, given the substantial investments made by firms in monitoring employees, as well as the growing forensic and monitoring capabilities enabled by information technology (IT) systems.

Data and Method:

In this paper they use a unique dataset that details employee-level theft and sales transactions at 392 restaurants in 38 American states. They also have data for the IT monitoring system rolled out in a temporally staggered way across multiple locations. The uniqueness of this dataset enables the authors to employ DiD approach to estimate the causal effect of information technology on theft monitoring.

Main Findings:

They find significant treatment effects in reduced theft and improved productivity that appear to be driven by changing the behavior of individual workers rather than selection effects. Their results suggest that employee misconduct is primarily a result of managerial policies rather than individual differences in ethics or morality, and that policies that reduce misconduct can benefit both firms and employees.