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

We present findings from a case study of one hospital's evolution from a nonprofit to a hybrid nonprofit/for-profit organizational structure. This case provides insight into the interplay of internal and external factors of strategic organizational change when an organization shifts from a heteronomous governance structure to an autonomous one. Our findings show how physicians' human capital bargaining power (HCBP) transcends external and internal boundaries to be a conduit for change with factor market shortages, mobility, alternative pay options and the opportunity to create firm-specific human capital. Our framework of strategic organizational change suggests that in dynamic industry settings, the power of human capital may acts as a double-edged sword for organizations when they seek to retain firm-specific human capital with rent sharing, knowledge sharing and nonpecuniary rewards. Lastly, we discuss how our findings are generalizable to other talent-intensive industries where external and internal factors interact to increase human capital value and promote radical structural change.