Research

Research interests: Economics of Digitization, IT Productivity,  Organizations, and Future of Work

Publications:

• "Investment in Cybersecurity Talent: Evidence from Firms’ Responses to Data Breaches", with Erik Brynjolfsson, Sarah Bana, Sebastian Steffen, and Xiupeng Wang, (Accepted at MISQ)

  • Selected Presentations: 2020 CIST, Virtual; 2021 WISE, Texas Austin; 2022 WEIS, Tulsa Oklahoma

  • Today, mountains of digital information generate substantial business and personal value, but also invite a new type of crime: cybercrime. Firms, therefore, have the responsibility to protect their data by taking cybersecurity measures. But do firms take their data seriously? Due to information asymmetries and incentive misalignment, firms may underinvest in cybersecurity. To shed light on how firms respond to data breaches, we gather detailed firm-level talent hiring data from online job postings and exploit arguably exogenous data breach events, which were required to be reported by law. Using a difference-in-differences design, we find that breached firms hire significantly more cybersecurity experts. This effect is most pronounced three months after the incident announcement date and is most persistent in the Information, Finance, and Retail sectors. However, only hacks, credit card fraud, and other thefts of digital information led to this effect, while theft of physical information did not. 

•  "Economies Before Scale: Survival and Performance of Young Plants in the Age of Cloud Computing", with Kristina McElheran, (Accepted at Management Science)

  • Selected Presentations:  WISE 2016, Dublin, Ireland; IIOC 2017, Boston;  CIST 2017, Houston; NBER Summer Summit 2017; NBER Productivity Lunch Seminar 2017;

  • Award: The 2019 Strategic Management Society Annual Conference Best Paper Price Final list (Honorable Mention)

• "Your Company Will Need Remote Work as Extreme Weather Gets Worse", 2023, with Erik Brynjolfsson, John Bai, Sebastian Steffen, and Chi Wan, Harvard Business Review

•  "Proximity and Knowledge Spillovers: Evidence from the Introduction of New Airline Routes", Forthcoming, with John Bai and Sifan Zhou, Management Science

  • Selected Presentations: Department of Management and Human Resources Brown Bag Seminar, UW Madison, 2019; MIT IDE Seminar 2018, Cambridge

• "Management Practices and Mergers and Acquisitions", 2022, with John Bai and Matthew Serfling, Management Science

  • Selected Presentations: Finance, Organizations, and Markets Conference 2018; 2019 Midwest Finance Association Meeting; 2019 SFS Cavalcade

  • Media Coverage:  Columbia Law School Blue Sky Blog

  • Feature in: Tuck Forum for Private Equity and Venture Capital

• "How Management Practices Impact M&A Outcomes", 2021, with John Bai and Matthew Serfling, Harvard Business Review

• "The Power of Prediction: Predictive Analytics, Workplace Complements, and Business Performance", 2021, with Erik Brynjolfsson and Kristina McElheran, Business Economics

  • Selected Presentations: MIT IDE Lunch Seminar, April 2020; Keynote Tech Conference, NABE, November 2020; NBER Productivity Lunch Seminar, April 2021; NBER Summer Institute, July 2021

  • Awards: Winner of 2020 Edward A. Mennis Contributed Papers Award competition, NABE; Winner of 2021 Best Paper Award at Strategic Management Society Annual Conference; Finalist of 2021 CSIG Best Proposal Award for Rigor in Research, Strategic Management Society

Other Publications: 

• "How to Get More from the Cloud: Three Talent Strategies You’re Probably Neglecting", 2024, with Kenneth Munie, Sebastian Steffen, and Prashant P. Shukla, California Management Review

• "Is Social Capital Associated with Individual Social Responsibility? The Case of Social Distancing During the Covid-19 Pandemic", 2022, with John Bai, Shuili Du, and Chi Wan, Empirical Economics

• "A resource-based perspective on information technology, policy, and environmental performance", 2015, with Shital Sharma,  and Jing Zhang, Proceedings of the 16th Annual International Conference on Digital Government Research. Phoenix, Arizona: ACM. 

Working Papers:

• "The Impact of Immigration Policy Shift on the Labor Market of IT Professionals", with Che-Wei Liu, (R&R at Management Science)

  • IT professionals provide strategic and competitive advantages for firms and countries in today’s digital age. Examining a significant immigration policy shift in the United States during 2017–2020, initiated by the Buy American Hire American executive order, we identified a growing wage disparity between immigrant and American IT professionals. Immigrant IT professionals experienced an average wage growth that was 8.33 percent higher than that of their American counterparts with similar demographic backgrounds and who worked in the same industry, equating to an additional $7,257 per year. This phenomenon is isolated to IT-related occupations and is most pronounced for new immigrants and those originating from countries with a prominent presence in H-1B applications. Further mechanism tests indicate that the main driver of this pattern is the shifting occupational composition of H-1B visa holders through increasing scrutiny in application and a rise in bargaining power among existing immigrant IT professionals. Further evidence in falsification tests argues against alternative explanations, strengthening our findings. Lastly, we provide suggestive evidence that the increased scrutiny and selection of H-1B applicants, and the resulting high denial rates and prevailing wages of H-1B visas are associated with higher exits of smaller businesses in states with high dependence on immigrant workers. These insights underscore the importance of well-informed immigration policies for highly skilled immigrants, preparedness for increased competition in the IT job market, and consideration of potential labor market shifts and market concentration.

• "Cloud Computing and Firm Productivity: Evidence from Firms' Labor Demand", 2022, with John Bai (Reject and Resubmit at Management Science)

  • Selected Presentations: Digital Economy Lab, Stanford HAI, 2021; TPRI, BU, 2021; MIT IDE Annual Conference 2022

  • Media Coverage:  MIT Sloan Ideas Made to Matter 

  • CIST 2022 Best Paper Award Nominee

  • Using novel measures that capture the investment in cloud technology based on firms' labor demand, we show that cloud adoption is associated with significant productivity gains for a large sample of US public firms in the last decade. This finding is robust to a range of cloud-related measures, samples, and specifications controlling for time-varying industry and firm-level transitory shocks. Various methods including control function, dynamic panel, and instrumental variable are further employed to address potential endogenous choices of cloud-related labor demand. Robust results from these methods suggest that the identified productivity-enhancing effect is likely causal. More importantly, by employing the newly developed Difference-in-Differences (DiD) estimator for the staggered roll-out and heterogeneous effects of treatment, we find that the adoption of cloud is associated with about 6.9% higher sales in the long run. This effect is statistically significant, economically large, and increases over time, indicating potential organizational learning and complementary investment. This study is thus among the first to provide large-scale firm-level evidence concerning both short-term and long-term effects of cloud technology on firm performance.

• "Digital Resilience: How Work-From-Home Feasibility Affects Firm Performance", with John Bai, Erik Brynjolfsson, Sebastian Steffen, and Chi Wan, (Under Review)

  • Data: Firm-level WFH index (SSRN)

  • Media Coverage:  MIT Sloan Ideas Made to Matter

  • We extract data from over 200 million U.S. job postings to construct a firm-level work-from-home (WFH) feasibility index by assessing firms' labor demand. Using a difference-in-differences (DiD) framework, we then demonstrate that firms that have a high pre-pandemic WFH index had significantly better weather the Covid-19 crisis with higher sales, net incomes, stock market return, and lower volatility during the pandemic compared to their industry peers. These results are particularly pronounced for firms in non-essential industries, where WFH feasibility was necessary to continue operation, as well as in non-high-tech industries, where WFH-enabled digital resilience led to larger comparative advantages over competitors. Lastly, we find that firms with lower pre-pandemic WFH feasibility attempted to catch up to their more digitally resilient competitors via greater software investment and IT-related hiring, which establishes the advantages of and the complementarity between digital technologies and WFH practices in today's economy. Our results are robust to a stringent set of empirical specifications, demand and pre-trend controls, fixed effects, and falsification tests, suggesting that the identified effects of this natural experiment are likely causal. The findings in our study imply that firms need to strategically manage the labor composition and digitization of their organizations, and consider that work-from-home practices, besides their many other advantages, are an effective way to hedge against operational risks.

• "Strategic Fit of IT resources in the age of cloud computing", with Kristina McElheran, (Under Revision)

  • Selected Presentations: AI in Strategy Workshop 2019, NYU Stern, New York;  MIT IDE Annual Conference 2019, Cambridge, MA; CIST 2019 Seattle, WA; WISE 2019, Munich, Germany

  • We develop a contingency view of the effect that quasi-fixed strategic commitments and environmental uncertainty have on the performance of this new type of IT resource. We argue that, because public-cloud-based IT emphasizes flexibility over firm-specificity, it should perform best in organizational contexts with high internal and external uncertainty. Owned IT capital should remain important in stable organizational contexts where it can better enhance efficiency. Working with the U.S. Census Bureau, we test these propositions in a large, representative sample of manufacturing incumbents with novel data on production strategy, environmental uncertainty, and detailed IT investment. We find that productivity benefits from public cloud investment are concentrated among plants with a flexibility-oriented production strategy and that operate in high-uncertainty environments. Owned IT capital remains a better fit for incumbents with low-variance, high-efficiency production, and those facing low external uncertainty. The complementary know-how needed to achieve strategic IT alignment varies by the type of IT, and plants shift their IT investments in the direction of better fit over time, consistent with investments in and learning about dynamic alignment.

•  "Information Technology, Firm Size, and Industrial Concentration", with Erik Brynjolfsson and Xiupeng Wang (Under Revision)

  • Media Coverage:  Chicago Booth Promarket

  • Information flows, and thus information technology (IT) are central to the structure of firms and markets. Using data from the U.S. Census Bureau, we provide firm-level evidence that increases in IT intensity are associated with increases in firm size and concentration in both employment and sales. Results from instrumental variables and long-difference models suggest that the effect is likely causal. The effect of IT on size is more pronounced for sales than employment, which leads to a decline in the labor share, consistent with the ``scale without mass'' theory of digitization. Furthermore, we find that IT provides greater benefits to larger firms by increasing their capability to replicate their operations across establishments, markets, and industries. Our findings provide empirical evidence suggesting that the substantial rise in IT investment is one of the main driving forces for the increase in firm size, decline of labor share, the growth of superstar firms, and increased market concentration in recent years.

• "The Effects of Technology Adoption on Firms, Supply Chains, and Rivals", with John Bai, Kristina McElheran, and Ryan Williams, (Under Revision)

  • Selected Presentations: WISE 2017, Seoul, South Korea

  • We study the effects of technological change and adoption timing on firms’ liquidity management practices and subsequent product market outcomes. We first posit that investment in Enterprise Resource Planning (ERP) software improves trade credit and inventory efficiencies between supply chain partners. We identify exogenous variation in the timing of a firm’s incentives to implement ERP by using a firm’s ex-ante exposure to the Year 2000 bug (Y2K). Our results show that a firm’s average accounts receivable collection period and inventory turnover improve following ERP implementation in the supply chain. Interestingly, this is due to adoption by either the focal firm or its key customer. 

• "Public Insurance and Corporate Techonology Investment: Evidence from ACA Medicaid Expansion", with John Bai, and Yue Qiu, (Under Revision)

  • We exploit the implementation of state-level ACA Medicaid expansion to study the effect of public insurance on corporate investment using confidential plant-level data sets from the U.S. Census. We focus on the U.S. manufacturing sector as we have a representative sample covering more than 70% of the US. Manufacturing economy. Our results indicate that the expansion of Medicaid leads to a decrease in both employment and capital investment in the adopted states, particularly new machinery and computer-related spending, at the plant level. This unexpected effect of the ACA Medicaid expansion leads to a decline in total value of shipment and the slowdown of productivity for plants located in the treated states and henceforth might have a long-term consequence on the overall economy and welfare distribution across states.