Management by Algorithm? Human Capital in the Age of Artificial Intelligence

Abstract

This paper explores allocation of human resources to teams and tasks within organizations through artificial intelligence (AI) and its implications for the management of human capital. We consider a thought experiment where all firms have access to the same basic AI-technology and show that the ability of firms to create advantages from human capital differs due to variation in the size of a firm’s internal labor market, employee data disclosure, and characteristics of a firm’s task structure and the dynamism of its competitive environment. Our analysis leads to novel and counter-intuitive predictions about the potential role of AI in the management of human capital with potentially wide-reaching implications for research, practice, and policy. More broadly, we contribute to active conversations about the future impact of AI on firm strategy and human capital management.

Keywords: Human Capital, Artificial Intelligence, Internal Labor Markets, Data Disclosure