Artificial intelligence, firm growth, and product innovation

By T. Babina, Anastassia Fedyk, Alex Xi He, James Hodson. 2024

We study the use and economic impact of AI technologies among U.S. firms. We propose a new measure of firm-level AI investments, using a unique combination of worker resume and job postings datasets. Our measure reveals a stark increase in AI investments across sectors. AI-investing firms see increased growth in sales, employment, and market valuations. This growth comes primarily through increased product innovation, reflected in trademarks, product patents, and product updates. AI-powered growth concentrates among ex-ante larger firms, leading to higher industry concentration and reinforcing winner-take-most dynamics. Our results highlight that new technologies can contribute to growth through product innovation.

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1. Yuehua Tang
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Citations in the corpus

• Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Models (2023, background): “, Jegadeesh and Wu (2013), Campbell et al. (2014), Hoberg and Phillips (2016), Gaulin (2017), Baker, Bloom, and Davis (2016), Manela and Moreira (2017), Hansen, McMahon, and Prat (2018), Ke, Kelly, and Xiu (2019), Ke, Montiel Olea, and Nesbit (2019), Bybee et al.”