Conditional Gains: When AI Investment Enhances Firm Efficiency

Pantelis Kazakis

MPRA Paper from University Library of Munich, Germany

Abstract: The rapid adoption of artificial intelligence (AI) in the corporate world has raised important questions about its impact on firm performance. This paper examines whether investments in AI—measured by the share of AI-skilled workers—are associated with improvements in firm efficiency. The analysis reveals that AI investment alone does not lead to higher efficiency. That is, firms employing more AI-skilled labor do not, on average, perform more efficiently than others. However, the results show that this relationship depends on firm context. Firms operating in more competitive markets appear to benefit more from AI investment. Additionally, firms that engage more heavily in tax avoidance also realize greater efficiency gains from AI, possibly due to their more aggressive or strategic resource allocation practices.

Keywords: artificial intelligence (AI); firm efficiency; market power; tax avoidance (search for similar items in EconPapers)
JEL-codes: D40 E22 G30 H26 L11 (search for similar items in EconPapers)
Date: 2025-04-02
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