Can startups generate a competitive advantage with open AI tools?

Stephen Michael Impink and Nataliya Langburd Wright
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Stephen Michael Impink: HEC Paris
Nataliya Langburd Wright: Columbia University - Columbia Business School, Management

No 1583, HEC Research Papers Series from HEC Paris

Abstract: We examine how open source generative AI adoption affects the venture performance of high-tech software startups. Using a matched sample, we find that startups that use generative AI in open product development raise about 15% less funding, especially in competitive markets with many similar AI adopters. However, startups targeting broad markets raise roughly 30% more funding when adopting generative AI early—within six months of its release—before a dominant design emerges. These findings suggest that while early AI adoption in the open can be beneficial, widespread use may erode differentiation. Overall, these results indicate that generative AI is not a silver bullet and may even hinder fundraising when competitive advantages are easily replicated.

Keywords: Generative AI; Strategy; Technological Change; Open Innovation; GitHub (search for similar items in EconPapers)
JEL-codes: O30 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2025-08-12
New Economics Papers: this item is included in nep-ain, nep-hrm and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1583

DOI: 10.2139/ssrn.5386212

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