Data-intensive innovation and the State: evidence from AI firms in China

Martin Beraja, David Yang and Noam Meir Yuchtman

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Artificial intelligence (AI) innovation is data-intensive. States have historically collected large amounts of data, which is now being used by AI firms. Gathering comprehensive information on firms and government procurement contracts in China’s facial recognition AI industry, we first study how government data shapes AI innovation. We find evidence of a precise mechanism: because data is sharable across uses, economies of scope arise. Firms awarded public security AI contracts providing access to more government data produce more software for both government and commercial purposes. In a directed technical change model incorporating this mechanism, we then study the trade-offs presented by states’ AI procurement and data pro-vision policies. Surveillance states’ demand for AI may incidentally promote growth, but distort innovation, crowd-out resources, and infringe on civil liberties. Government data provision may be justified when economies of scope are strong and citizens’ privacy concerns are limited.

Keywords: data; innovation; artificial intelligence; China; economies of scope; directed technical change; industrial policy; privacy; surveillance (search for similar items in EconPapers)
JEL-codes: E00 L5 L63 O20 O30 O40 P00 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2021-03-31
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Downloads: (external link)
http://eprints.lse.ac.uk/121854/ Open access version. (application/pdf)

Related works:
Journal Article: Data-intensive Innovation and the State: Evidence from AI Firms in China (2023)
Working Paper: Data-intensive innovation and the State: evidence from AI firms in China (2021)
Working Paper: Data-intensive innovation and the State: evidence from AI firms in China (2021)
Working Paper: Data-intensive innovation and the State: evidence from AI firms in China (2021)
Working Paper: Data-intensive Innovation and the State: Evidence from AI Firms in China (2020)
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