Artificial Intelligence, Firm Growth, and Product Innovation

100 Pages Posted: 27 Aug 2020 Last revised: 28 Jul 2022

See all articles by Tania Babina

Tania Babina

Columbia University - Columbia Business School, Finance

Anastassia Fedyk

University of California, Berkeley - Haas School of Business

Alex Xi He

University of Maryland - Robert H. Smith School of Business

James Hodson

AI for Good; Cognism; Jožef Stefan Institute

Date Written: May 18, 2022

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

Suggested Citation

Babina, Tania and Fedyk, Anastassia and He, Alex Xi and Hodson, James, Artificial Intelligence, Firm Growth, and Product Innovation (May 18, 2022). Available at SSRN: https://ssrn.com/abstract=3651052 or http://dx.doi.org/10.2139/ssrn.3651052

Tania Babina (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

Anastassia Fedyk

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Alex Xi He

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

HOME PAGE: http://www.alexxihe.com/

James Hodson

AI for Good ( email )

800 Arlington Boulevard
El Cerrito, CA 94530
United States
9177449036 (Phone)
9177449036 (Fax)

HOME PAGE: http://ai4good.org

Cognism ( email )

92 Albert Embankment
London, SE17TT
United Kingdom

HOME PAGE: http://cognism.com

Jožef Stefan Institute ( email )

Jamova cesta 39
Ljubljana, 1000
Slovenia

HOME PAGE: http://ailab.ijs.si

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