Artificial intelligence, firm growth, and product innovation

Tania Babina, Anastassia Fedyk, Alex He and James Hodson

Journal of Financial Economics, 2024, vol. 151, issue C

Abstract: We study the use and economic impact of AI technologies. We propose a new measure of firm-level AI investments using employee resumes. Our measure reveals a stark increase in AI investments across sectors. AI-investing firms experience higher 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 larger firms and is associated with 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; Product innovation; Superstar firms; Industry concentration (search for similar items in EconPapers)
JEL-codes: D22 E22 J23 J24 L11 O33 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:151:y:2024:i:c:s0304405x2300185x

DOI: 10.1016/j.jfineco.2023.103745

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