AI-Adoption, Globalization, and Firms' Labor Investment Efficiency

This paper examines how AI adoption affects firms' labor investment efficiency, focusing on moderating the impact of globalization in GCC nations. Using firm-level panel data from 2015 to 2024, it applies a System Generalized Method of Moments (GMM) to account for endogeneity and dynamic adjustments. Dynamic Capabilities Theory (DCT) suggests that AI adoption is a strategic resource for a firm to improve efficiency. Using four country-level globalization proxies: the Globalization Index (KOF), the Digital Adoption Index (DAI), the Global Competitiveness Index (GDI), and Total Factor Productivity (TFP), it found that globalization moderates AI adoption's impact on labor investment efficiency, supporting Globalization and Labor Market Theory, which states that globalization affects enterprises' resource optimization through global markets and technologies. It also shows that AI adoption improves labor investment efficiency significantly, and globalization's moderating effect strengthens this relationship, especially in more globally integrated countries.