Technological dynamism and labor investment efficiency: exploring strategic resilience

Abstract

This study contributes to the literature by exploring the impact of technological dynamism (TD) on labor investment efficiency, analyzing non-financial U.S. firms listed on the S&P 500 index from 1993 to 2023. Employing a novel TD measure based on industry-level R&D intensity, we find that firms in highly dynamic technological environments face greater challenges in achieving labor investment efficiency, with inefficiencies primarily driven by overinvestment rather than underinvestment. Robust across various sensitivity and endogeneity tests, the results highlight how rapid technological change complicates optimal labor allocation. Leadership characteristics significantly moderate this relationship, as external CEOs and extensive CEO media coverage weaken the link between TD and LIE, while longer CEO tenure enhances firms’ alignment of labor investments with technological demands. Furthermore, corporate diversification, firm age, the adoption of the Inevitable Disclosure Doctrine, and business strategies emerge as key moderators through which TD influences LIE, demonstrating the interplay between organizational strategies and regulatory frameworks.