The Impact of Artificial Intelligence on Firm Performance

Abstract

Artificial intelligence has not only the potential to influence services and products but also change the existing innovation process itself. While AI creates economic and technological disruption within firms’ competitiveness by serving as a General Purpose Technology (GPT), the focus of the previous literature has been made to the impact on AI on macro economy and employment substitution. To fill this gap, this paper investigates the relationship between the adoption of AI technologies and firm performance such as firm value, profit and cost structures. We identified 105 listed firms in the U.S. that have adopted AI technologies from 2008 to 2014, and tested the relationship using Difference-in-differences (DID). Our empirical findings indicate strong evidence for the positive relationship between AI and firm value. In addition, we find that automation AI has significant and positive impacts on the firm’s cost structure, while we do not find evidence of the effect of augmentation AI on the firm’s profit and cost structures. Finally, we discuss implication of AI adoption by firms for academic literature and firm strategy for AI technologies.

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