Artificial Intelligence, Firm Growth, and Product Innovation

Abstract

We study the use and economic impact of AI technologies. We propose a new measure of firm-level AI investments using worker resume data. Our measure reveals a stark increase in AI investments across sectors. AI-investing firms experience increased growth in sales, employment, and market valuations. This growth comes primarily through increased product innovation. Our results are robust to instrumenting AI investments using firms’ exposure to universities’ supply of AI graduates. AI-powered growth concentrates among ex-ante larger firms, leading to higher industry concentration. Our results highlight that new technologies like AI can contribute to growth and superstar firms through product innovation.

Keywords: artificial intelligence, intangible capital, technological change, technology adoption, economic growth, product innovation, productivity, human capital, superstar firms, industry concentration

JEL Classification: D22, E22, J23, J24, L11, O33