Contract Institution,Production Complexity and the Rise of Industrial Robots:From the Perspective of Internalization Advantage
The rise of robots worldwide is an important feature of industrial automation.While existing studies have investigated the driving forces behind the phenomenon in terms of technological advancements and labor costs,few have analyzed it from the perspective of contract institutions within the framework of incomplete contracts.Enterprise theory posits that firms are amalgamations of contracts,with the labor contract being fundamental.However,labor contracts frequently remain incomplete.This incompleteness is especially pronounced in countries with poor contract enforcement,leading to heightened transaction costs for firms due to the absence of enforcement constraints.In contrast to contractual relationships,firms assume ownership of industrial robots.By engaging in internal management and control of these robots,firms can significantly mitigate transaction costs caused by incomplete labor contracts and realize the internalization advantage of production processes.This paper offers a comprehensive examination of the behavioral rationale behind firms'decisions regarding robot adoption from the perspective of contract institutions and provides valuable policy insights for countries seeking to rationally reconcile robot adoption and employment.This paper incorporates incomplete labor contracts and the ownership relationship of robots into a complementary task production model,establishing a theoretical framework to assess the impact of contract institution and industry production complexity on robot adoption.Subsequently,utilizing cross-country panel data from 1993 to 2019,the paper empirically tests the theoretical prediction through a generalized difference-in-differences(DID)model and conducts robustness tests.Lastly,the paper examines and excludes other potentially competing hypotheses concerning country-specific environments and industry production characteristics.The findings indicate that in countries with low-quality contract institutions,industries with high production complexity increase their investment in robots to mitigate transaction costs and capitalize on the internalization advantage offered by robot adoption in production processes.Based on research findings,this paper proposes the following implications.Firstly,the government should establish a scientific and effective process for hearing labor contract disputes,and reduce the cost and time needed for enterprises to defend their rights,to avoid the problem of robotic labor substitution caused by incomplete contracts.Secondly,the government can guide workers to establish a correct labor concept,enhance the spirit of contract,and strengthen the supervision of the implementation of labor contracts through the construction of a digital credit system.Thirdly,while seeing the advantages of internalization brought by industrial robots,enterprises should also pay attention to the specific advantages of laborers,reasonably plan the application of robots and labor employment structure,thereby contributing to the coordinated development of industrial automation and the labor employment in the digital technological revolution.
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