Seminar  |  02/10/2021 | 5:00 p.m.  –  6:15 p.m.

Innovation & Entrepreneurship Seminar: Can Artificial Intelligence Substitute or Complement Managers? Divergent Outcomes for Transformational and Transactional Managers in a Field Experiment

Nan Jia (USC Marshall)

Seminars currently take place in online format (see seminar page).

Can artificial intelligence (AI) technologies complement or substitute for human managers in creating greater value for organizations? We argue that managers of the transformational leadership style with greater social skills benefit more from the assistance of AI than do managers of the transactional leadership style with fewer social skills. We provide causal evidence through a field experiment in a fintech firm whose managers provide training to employees on the calls made to collect overdue loans. We randomly assign employees to be trained by one of the following five options: an AI-bot, a transformational leadership-style manager, a transactional leadership-style manager, and both managers assisted by the AI-bot. We find that employees trained by each AI-assisted manager achieved higher performance, by collecting more payments, than did those trained by the manager alone, suggesting that both managers can gain from AI assistance. More interestingly, employees trained by the AI-assisted transformational manager outperformed both those trained by the AI-assisted transactional manager and by the AI-bot alone, indicating complementarity between transformational leadership and AI assistance. By contrast, the employees trained by the AI-assisted transactional manager underperformed those trained by the AI-bot alone, suggesting that the transactional manager is still at risk of being replaced by the AI-bot. These divergent performance outcomes occur because employees learn more from the AI-assisted transformational manager than from the AI-assisted transactional manager. Our findings suggest that, compared with transactional leadership, transformational leadership enable firms to obtain greater economic returns from their investment in deploying AI to manage employees.

Contact Person: Marina Chugunova