Technology, Sustainability, and Management

The paper presented in this ZEW Research Seminar discusses three pressing challenges that affect firm productivity and profitability, namely the deployment of artificial intelligence (AI), climate change, and the changing nature of management practices. The author argues that it is crucial for firms using AI technologies and complying with environmental standards to actively implement management practices that are in line with the current Sustainable Development Goals (SDGs), SDG 8 (United Nations 2023) in particular, and promote employee empowerment, employee inclusion and equality. She emphasizes the complementary role between AI technologies, environmental compliance, and SDG-based management practices, and test for three-way complementarities by applying the cube-view of complementarities on cross-sectional German firm-level data from the year 2018. Further, the author distinguishs between different levels of technology deployment in firms by relying on information whether firms deploy solely modern technological equipment or exploit additionally AI software tools and digital platforms. She finds disproportionate productivity and profitability effects in German firms implementing the whole three-way system of complements rather than implementing these practices in isolation or as incomplete two-way combinations. Especially firms with modern technological equipment and AI software tools are doing good in harvesting complementarity effects, while firms with additional use of digital platforms have difficulties in achieving complementarity effects. The estimation results are robust to the construction of a homogeneous firm population and to a model-driven double selection of control variables. The paper delivers further subgroup analyses on firm size and industry affiliation.