Forced to Change? Media Exposure of Labor Issues and Firm Artificial Intelligence Investment

Despite growing interest in how artificial intelligence (AI) affects the labor market, there is limited understanding of the labor-related factors driving firms to invest in AI. Drawing on the institutional perspective of media coverage, we propose that media exposure of labor issues exerts reputational pressure on firms, heightening their awareness of the necessity and urgency to address these problems. Consequently, firms are driven to invest in AI as a potential solution, given its capabilities in both augmenting and automating human tasks. Analyzing a unique data set that combines various archival data sources from U.S. public firms, we find support for this argument. Our analyses reveal that when firms have stronger motivation and capability to invest in AI, this effect becomes more pronounced. In contrast, firms are not inclined to engage in non-AI information technology (IT) or general non-AI investments in response to media exposure of labor issues, indicating their preference for AI investment to address labor challenges. Our exploration of plausible mechanisms suggests a distinct automation motive underlying firms’ AI investment, particularly geared toward high-skilled labor, in contrast to traditional automation investment, which primarily targets non-high-skilled labor. Further, our findings suggest that AI investment reduces future media exposure of labor issues and leads to less labor use, indicating that firms likely engage in AI investment for automation rather than augmentation purposes. This study contributes to AI research in management information systems by identifying AI investment as a strategic response to media exposure of labor issues. Our findings also have meaningful implications for managers and policymakers regarding firm AI investment.

History: Sam Ransbotham, Senior Editor; Chad Ho, Associate Editor.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.0402.