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Artificial intelligence and firm growth — catch-up processes of SMEs through integrating AI into their knowledge bases

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  • Alexander Kopka

    (University of Bremen)

  • Dirk Fornahl

    (Friedrich Schiller University Jena)

Abstract

Artificial intelligence (AI) is seen as a key technology for future economic growth. It is labelled as a general-purpose technology, as well as an invention of a method for inventing. Thus, AI is perceived to generate technological opportunities and through these, innovations, and productivity growth. The leapfrogging hypothesis suggests that latecomer firms can use these opportunities to catch up. The aim of this paper is to provide insight into this catch-up process of latecomer firms through integrating AI into their knowledge portfolio and thereby creating new technological trajectories. The moderating effect of firm size is also analysed. Combining firm-level data with patent data, a regression at the firm level is conducted. Evidence is found that smaller firms experience productivity growth from AI when operating at the productivity frontier, indicating the opposite of the leapfrogging hypothesis. However, there is evidence for the positive impact of AI on firm innovation, which is higher for latecomer firms that are larger in size. In general, we find a diverging pattern of the influence of AI on productivity and innovation growth, indicating the need for a finer grained analysis that takes indirect effects - that also could explain the observed productivity paradox - into account.

Suggested Citation

  • Alexander Kopka & Dirk Fornahl, 2024. "Artificial intelligence and firm growth — catch-up processes of SMEs through integrating AI into their knowledge bases," Small Business Economics, Springer, vol. 62(1), pages 63-85, January.
    • Handle: RePEc:kap:sbusec:v:62:y:2024:i:1:d:10.1007_s11187-023-00754-6
    DOI: 10.1007/s11187-023-00754-6
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    More about this item

    Keywords

    Artificial intelligence; Firm growth; Catch-up; Innovation; Productivity;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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