The Impact of Generative AI Announcements on Suppliers: Evidence from the Stock Market

Abstract

The rise of Generative AI (GenAI) technology is revolutionizing firm operations and supply chain management, profoundly influencing firms within the GenAI supply chain network. While a few emerging studies have explored the impact of GenAI initiatives on firms’ stock performance, it remains unclear how such initiatives affect the stock price movements of their supply chain partners. This paper empirically investigates the impact of firms’ GenAI initiatives on the abnormal stock returns of their suppliers by analyzing data on news, supply chain relationships, and daily stock prices. Our empirical analysis reveals that, on average, firms’ GenAI announcements lead to a positive abnormal return of 0.27% for their suppliers on the announcement day. We further investigate how this spillover effect varies across suppliers with different characteristics. The results indicate that the abnormal return is more positive for suppliers with higher levels of R&D intensity, greater sales growth, located closer to their customers, or those operating within a less competitive industry. Our findings have important implications for managers and investors.

Keywords: Generative AI, downstream innovation, supplier, spillover effect, abnormal return, event study