The purpose of this paper is to examine how artificial intelligence (AI) shapes the process of human capital obsolescence (HCO) in different types of organizations, leading to different business failure pathways.
Drawing on relevant literature on AI advancement and its impact on employee knowledge, skills and abilities, we developed a four-domain framework to organize AI-induced HCO in both state-owned enterprises (SOEs) and privately owned enterprises (POEs).
Our findings, summarized in the four-domain framework, demonstrate that planned HCO in SOEs involves proactive upskilling initiatives to align with technological advancements. In POEs, planned HCO is driven by competitive pressures, leading to strategic workforce transformations to maintain market relevance. Unplanned HCO in SOEs results from complacency and lack of foresight, causing skill erosion and inefficiency. Conversely, POEs experiencing unplanned HCO face abrupt skill obsolescence due to rapid technological shifts and inadequate preparedness.
Integrating insights from human capital theory and the literature on obsolescence, this study advances the concept of AI-induced HCO to illuminate how AI has and could trigger the obsolescence of individuals’ knowledge, skills and abilities in different types of organizations. The concept of HCO captures the accelerated pace of obsolescence stemming from AI technological advancements, which have fundamentally altered the nature of work.
