Organizational Technology Ladders: Remote Work and Generative AI Adoption

In this study, I propose that firms move along an "organizational technology ladder'': adopting one technology transforms hiring and work processes, which then changes the costs of adopting the next technology. I focus on the impact of firms' adoption of remote work technology on the proliferation of generative AI technology: using detailed job posting data and an IV approach based on differences in labor market pressure to allow remote work, I show that a 10 pp rise in remote work induced by the instrument in 2021-2022 causes an increase in job postings mentioning generative AI skill by 2024 of 0.4 pp across firms and 1.1 pp across occupations within firms. Generative AI adoption also changes firms' use of remote work: a synthetic difference-in-differences estimation around the release of ChatGPT shows that firms with greater exposure to generative AI reduced their remote hiring by 13% relative to a matched control group, with a more negative effect for tech firms than for non-tech firms. I explore the mechanism for these effects and show that remote work adoption shifts hiring towards technology and management skills that then enable more rapid generative AI adoption. Generative AI adoption skews remaining human tasks towards requiring more decision-making in the tech sector, which can explain the decline in remote work in tech, if decision-intensive tasks are less productive while working remotely. Firms that have low remote productivity, as evidenced by having a return-to-office mandate, are more likely to adopt generative AI after hiring remotely. I formalize this technology ladder mechanism using a task-based model of sequential firm investments in new technologies that change the importance of in-person coordination.