From Human Annotation to LLMs: SILICON Annotation Workflow for Management Research

Abstract: Unstructured text data annotation and analysis are fundamental to management research, often relying on human annotators through crowdsourcing platforms. While LLMs promise to provide a cost-effective and efficient alternative to human annotation, there lacks a systematic workflow that evaluate when LLMs are suitable or how to proceed with LLM-based text annotation in a reproducible manner. This paper addresses this methodological gap by introducing the ``SILICON" (Systematic Inference with LLMs for Information Classification and Notation) workflow. The workflow integrates established principles of human annotation with systematic prompt optimization and model selection, addressing challenges such as developing robust annotation guidelines, establishing high-quality human baselines, optimizing prompts, and ensuring reproducibility across LLMs. We validate the SILICON workflow through seven case studies covering common management research tasks. Our findings highlight the importance of validating annotation guideline agreement, the superiority of expert-developed human baselines over crowdsourced ones, the iterative nature of prompt optimization, and the necessity of testing multiple LLMs. We also find that LLMs agree well with expert annotations in most cases but show low agreement in more complex multi-label classification tasks. Notably, we propose a regression-based methodology to empirically compare LLM outputs across prompts and models. Our workflow advances management research by establishing rigorous, transparent, and reproducible processes for LLM-based annotation. We provide practical guidance for researchers to effectively navigate the evolving landscape of generative AI tools.