Week 11 – Reading Summary – Tambe and Hitt (2014) – Xi Wu

Tambe, P., & Hitt, L. M. (2014). Job Hopping, Information Technology Spillovers, and Productivity Growth. Management Science, 60(2), 338–355.

Like earlier general-purpose technology such as electricity or the steam engine, researchers argued that information technology (IT) investments generate productivity “spillovers” among firms, and the movement of IT workers among firms is believed to be an important mechanism by which IT-related innovations diffuse throughout the economy. In this paper, the authors use employee microdata obtained from an online resume database to test the hypothesis that firms benefit from the IT investment of other firms because the flow of specialized technical know-how among organizations facilitates the implementation of new IT innovations.

Based on the literature on the impact of R&D spillovers and IT investment on productivity, this study modeled the knowledge available to the focal firm as the weighted sum of the knowledge of other firms in the sample, and the transfer of IT-related knowledge occurs through the mobility of workers. Two IT investment measures are applied: IT capital stock-based measure and IT labor-based measure. The external IT pool measure is computed as the IT intensity of other firms. OLS and Fixed Effect model are used to support the hypothesis of productivity spillover effect through the IT labor flow. This study also compares the benefits through IT labor flow with that through the IT investments of geographically proximate firms, the estimators indicate that regional spillovers appear to be driven by IT labor flows, and IT labor flows appear to be an important source of spillovers even outside a fixed region.

This study is the first to analyze how IT labor flows drive IT spillovers and, to investigate this issue using microdata on labor mobility.  It suggests that a substantial amount of variation in IT returns can be explained by productivity spillovers generated by IT labor flows.