Jesús García Romanos - Research

Jesús García Romanos

Job Market Paper

Corporate Digitalization and Workforce Restructuring: Does Ignoring the Digital Transformation Increases Mass Layoffs?

With Ester Martínez-Ros and Eduardo Melero

We study the relationship between firms’ digitalization and their workforce restructuring decisions. Digital transformation overhauls employees’ tasks, automating many and making some jobs redundant while creating new types of jobs. Moreover, the digitalization process may require leveraging current employees’ firm-specific knowledge to align the company’s organizational strategy with the new environment. Accordingly, we analyze whether digitalization increases or decreases the probability of workforce restructuring. Our study is mainly based on a curated database of layoff announcements and a novel text analysis measure of the digitalization of US public companies between 2003 and 2016. Our results indicate that firms embarking on digital transformation carry out fewer mass layoffs. This finding is more pronounced in regions characterized by a labor force with lower levels of educational attainment, where recruiting individuals with the necessary digital skills presents notable challenges. We provide complementary evidence on the effect of digitalization on firms’ hiring efforts, which is largely consistent with our main results on mass layoffs.

JEL Classification: C23, 033, J63.

Keywords: digitalization, mass layoffs, strategic human capital, content analysis, panel data

2nd Version of the working paper available at SSRN

1st Version of the working paper available at SSRN

Abstract at Academy of Management Annual Meeting Proceedings

Presented at:

Druid Academy. Jan 11-13, 2023, at Aalborg, Denmark.
Madrid Work & Organizations Workshop May 18-19, 2023, at IESE Business School.
Munich Summer institute. May 22-26, 2023, at Ludwig Maximilians University, Germany.
Druid23, June 10-12, 2023, at NOVA School of Business and Economics, Lisbon.
83rd Annual meeting of the Academy of Management. August 4-8, 2023, at Boston, Massachusetts.

Available upon request

Publications

Digitalization and Employment in Europe: The Role of Size and the Complementarity of R&D

With Ester Martínez-Ros

The relationship between digitalization and employment is inconclusive in the literature. Through a robust regression, we analyze the effect of digitalization on companies’ employment levels using information technology (IT) investments from the 2015 and 2016 Innobarometer surveys. In accordance with several previous studies, we find a positive impact on employment along the degrees of digitalization, proxied by investing in software development and acquiring hardware and software. We contribute to the literature by identifying an inverted U-form for this association. Additionally, we find that this effect is more prominent in small companies with fewer than fifty employees. The effect diminishes for very large companies. In addition, adding to the research on the complementarity between various innovation inputs, we see a positive association between employment and investment in both IT assets and research and development (R&D). On average, companies that invest in IT and R&D have 11.5 percent more employees than those that embrace just one. While we observe that small companies that invest in either type of asset employ more people; at larger enterprises, the positive effect is only found when they invest in both. The study supports the findings using alternative regression methods, quantile and Lewbel instrumental variables.

JEL Classification: O33, J23, J24

Keywords: management, digitalization, IT investment, R&D, SME, innovation, employment

Published at R&D Management http://doi.org/10.1111/radm.12656

Presented at

2020 XX EURAM conference of the European Academy of Management
2021 XXIII APPLIED ECONOMICS MEETING" conference organized by the “Free Association of Economy” (AldE) and the "Applied Economic Analysis journal."

Configuration Management & Asset Management base of Knowledge Management.

Published in the Spanish Journal of Software Innovation, Quality, and Engineering. Volume 4, No 3, 2008. http://www2.ati.es/spip.php?article1056

Presented at III Inter-academic congress 2008 itSMF Spain at Carlos III University.

Other work

On the relationship of Digitalization and Environment and its effect on firm performance

With Ester Martínez-Ros

Customers and stakeholders demand that firms consider their environmental and social priorities more, while managers must look for their duties to firms’ shareholders. We study the relationship between firms’ digitalization focus, environmental best practices and controversies, and how they affect financial performance. Our study is based on a crafted database merging a text analysis measure of the digitalization focus of US public companies between 2000 and 2019 with their MSCI ESG KLD ratings of environmental behavior and Compustat financial information. We handle fixed effects and endogeneity of dynamic relations using system GMM estimations. Our results indicate that firms with a digital focus have better environmental ratings, better best practices, and fewer environmental controversies, and both digitalization and environmental behavior lead to better financial performance. A large part of the digitalization effect on financial performance is through the indirect effect of environmental best practices. Nevertheless, we lower the credibility of firms’ accountability claims of environmental behavior, as firms do not avoid controversies when they profit from them, which may hint at some greenwashing in their environmental best practices.

JEL Classification: C33, O33, O44, Q50

Keywords: management, digitalization, environment, firm performance, sustainability

Presented at:

VIII Digitalization, Knowledge, Innovation, and Internationalization Strategies (DKIIS). November 9-10, 2023, at University of Valencia.
26th Applied Economics Meeeting. June 6-7, at University of Cantabria, Santander.
DRUID24. June 13-15, 2024. Hosted by SKEMA Business School and University Côte d'Azur at Nice.

Available upon request

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