Can startups generate a competitive advantage with open AI tools?

Stephen Michael Impink and Nataliya Wright
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Stephen Michael Impink: HEC Paris - Ecole des Hautes Etudes Commerciales

Working Papers from HAL

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)
Date: 2025-08-12
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05384766

DOI: 10.2139/ssrn.5386212

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