Harnessing the Power of AI in RD&E Management: The Innovation Index

Federico Platania, Celina Toscano Hernandez, Imane El Ouadghiri and Jonathan Peillex ()
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Federico Platania: ISG - ISG International Business School [Paris]
Celina Toscano Hernandez: ISC Paris - Institut Supérieur du Commerce de Paris
Imane El Ouadghiri: DVHE - De Vinci Higher Education
Jonathan Peillex: ICD International Business School Paris, LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286 - UPJV - Université de Picardie Jules Verne

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Abstract: This article investigates the complex relationship between artificial intelligence (AI)-related technological innovation and its impact on the market returns of leading technology companies. We introduce the "Innovation Index," a latent variable based on the number of AI-related patents, and incorporate it into the traditional Fama-French model to better capture the influence of AI advancements on financial performance. Using a state-space representation, our empirical analysis suggests that AI-related innovation significantly contributes to the market returns of prominent and leading technology firms. The findings highlight the strategic importance of AI investments in sustaining long-term growth and competitiveness.

Keywords: Development and engineering (RD&; E); Research; Kalman filter; Innovation; Excess of return; Engineering management; Artificial intelligence (AI) (search for similar items in EconPapers)
Date: 2025
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Published in IEEE Transactions on Engineering Management, 2025, 72, pp.3055-3064. ⟨10.1109/TEM.2025.3585975⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05580122

DOI: 10.1109/TEM.2025.3585975

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