Following Doctors’ Orders: Organizational Change as a Response to Human Capital Bargaining Power

Organizational change is facilitated by both internal and external factors, yet little is known about how they might be linked. Through a case study of one hospital’s change from a nonprofit to a nonprofit/for-profit organizational structure, we find that human capital bargaining power is a key mechanism that integrates internal and external drivers of change. However, a paradox surfaces whereby the strength of the bargaining power can force structural changes that may be counterproductive. Our results show that human capital bargaining power is a “double-edged sword,” shifting the governance structure to benefit those with power by providing additional rents, but creating challenges for the ongoing management and retention of such valuable human capital. Our findings have implications for the long-term survival of talent-intensive organizations where human capital bargaining power is strong.