Corporate governance, ownership, and the introduction of new technology
Technological change has driven increased automation in all stages of the value chain, from logistics to design, material processing, assembly, quality control, delivery, customer service, and everything in between. Different forms of automation may differentially affect the demand for workers at various skill levels. Some forms of automation substitute for work done typically by low-skilled workers but require complementary work of high-skill workers, whereas other forms may reduce the demand for high-skill workers. What do ESOP firms, where employees can own part or all of the firm, choose regarding different types of automation?
By granting ownership to workers, ESOP allows the potential to gain a slice of future profits and aligns the interests of both parties (employee owners and other shareholders). Employees are also provided a representation of their voice through an ESOP trustee and committee. Thus, we expect that the adoption of technologies by such firms will be different from that of other firms. Those that advance worker well-being, such as financial returns, employment stability, workplace safety, and job satisfaction, will be more likely to be chosen. Using difference-in-differences and discrete-time hazard models, the paper compares the adoption of industrial robots and artificial intelligence in ESOP and conventional firms in U.S. manufacturing (the second largest sector with ESOP firms) matched by size, public/private status, industry, and commuting zones. The analysis is at the firm and establishment levels.
Results indicate that establishments in employee-owned firms exhibit a significantly greater propensity to deploy industrial robots and artificial intelligence than similar plants in conventional firms. Employee owners embrace automation because of the gains from financial returns, as shown by the positive relationship between plan assets per participant and technology adoption propensity. Ownership affords them a voice and power to protect their interest in sustaining employment and capturing productivity returns. The presence of institutional channels for worker voice and profit-sharing enshrined in ESOP legal rules and regulations appears pivotal in realizing mutual gains from manufacturing modernization.