Mind the Gap: AI Adoption Disparity and Supply Chain Dynamics

Abstract

Disparities in firms' artificial intelligence (AI) adoption influence supply chain management. We develop a simple model that suggests a positive assortative matching of suppliers and customers in AI adoption. Empirically, we find that disparities in AI adoption between suppliers and customers destabilize existing relationships and prevent new relationship establishments. By estimating a structural supplier-customer matching model, we confirm that such positive assortative matching is economically optimal and that the effect of disparities in AI adoption on supply chain relationships is likely causal.

Keywords: artificial intelligence, supply chain, product innovation, matching model

JEL Classification: D21, D22, L11, L14, O33