Artificial Intelligence, Firm Growth, and Product Innovation
We study the use and economic impact of artificial intelligence (AI) technologies among U.S. firms. We propose a new measure of firm-level AI investments, using a unique combination of detailed worker resume and job postings datasets. Our measure reveals a stark increase in AI investments across sectors in the last decade. AI-investing firms see higher growth in sales, employment, and market valuations. We use a novel identification strategy, instrumenting firm-level AI investments with firms' ex-ante exposure, based on alumni networks, to the supply of AI-skilled labor from universities historically strong in AI research. The positive growth effect of AI comes primarily through increased product innovation, reflected in trademarks, product patents, and updates to product portfolios. AI-powered growth concentrates among the ex-ante largest firms, leading to higher industry concentration and reinforcing winner-take-most dynamics. Our results highlight that new technologies can contribute to growth through product innovation.
Babina, Tania, Anastassia Fedyk, Alex Xi He, and James Hodson. "Artificial Intelligence, Firm Growth, and Product Innovation." SSRN (November 11, 2021). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3651052.
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