The impact of industrial robot uses on the labor cost stickiness of Chinese firms

Abstract

PurposeThe study aims to investigate the impact of industrial robot application on corporate labor cost stickiness and labor investment efficiency in China.Design/methodology/approachUsing the textual analysis to construct firm-level industrial robot application indicators in China, we implement the methodology in Anderson et al. (2003) and Banker and Byzalov (2014) to estimate cost stickiness.FindingsWe argue that the industrial robot uses in China would increase firms’ labor adjustment costs by increasing the employment scale and upgrading the employment structure (i.e. by employing more high-skilled and high-educated labor). Consistent with our expectation through the channel of labor adjustment costs, the use of robotics increases firms’ labor cost stickiness. We further find that the positive impact is more significant among labor-intensive industries, and among state-owned enterprises with lower labor adjustment flexibility. We also find that industrial robot uses do not decrease the labor cost stickiness even when robots are more likely to substitute labor. Finally, we find that industrial robot uses significantly facilitate more efficient hiring practices by mitigating overinvestment in labor (i.e. over-hiring).Originality/valueAgainst the backdrop of intelligent manufacturing worldwide, our study sheds new insight into the effects of new technologies on corporate labor cost behavior in developing countries. We contribute to scant studies examining how robotics, AI adoption or other automation technologies (e.g. specialized machinery, software, etc.) affect corporate cost behavior.