IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v82y2025ics1544612325007500.html

Quantifying disruption in the age of AI: An AI-based approach to evaluating startup innovation and investment potential

Author

Listed:
  • Imerman, Michael B.
  • Fabozzi, Frank J.

Abstract

Clayton Christensen's disruptive innovation theory highlights how technologies transform industries, but quantifying disruption remains challenging. This paper introduces Disruptor Detective, an AI-driven tool that evaluates companies using seven criteria of disruptive innovation, integrating financial data and natural language processing. Given the limited data available about private companies and early-stage startups, this approach provides an objective framework for investors to assess their disruptive potential. We analyze 12 generative AI firms, including OpenAI and Hugging Face, to demonstrate the tool in action. The tool revealed varied disruption scores, with firms developing open-source models, such as Hugging Face, exhibiting the most substantial disruptive potential. In contrast, firms focused on specialized applications show more incremental innovation. Additionally, disruption scores exhibit a positive, albeit modest, correlation with financial metrics such as valuation and revenue. The findings provide a scalable, data-driven approach to evaluating disruptive innovation, bridging the gap between qualitative theory and quantitative assessment in venture capital.

Suggested Citation

  • Imerman, Michael B. & Fabozzi, Frank J., 2025. "Quantifying disruption in the age of AI: An AI-based approach to evaluating startup innovation and investment potential," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325007500
    DOI: 10.1016/j.frl.2025.107491
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325007500
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.107491?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Hunt, Wil & Sarkar, Sudipa & Warhurst, Chris, 2022. "Measuring the impact of AI on jobs at the organization level: Lessons from a survey of UK business leaders," Research Policy, Elsevier, vol. 51(2).
    2. Nils Grashof & Alexander Kopka, 2023. "Artificial intelligence and radical innovation: an opportunity for all companies?," Small Business Economics, Springer, vol. 61(2), pages 771-797, August.
    3. Zacharakis, Andrew L. & Meyer, G. Dale, 1998. "A lack of insight: do venture capitalists really understand their own decision process?," Journal of Business Venturing, Elsevier, vol. 13(1), pages 57-76, January.
    4. 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.
    5. Oduro, Stephen & De Nisco, Alessandro & Mainolfi, Giada, 2023. "Do digital technologies pay off? A meta-analytic review of the digital technologies/firm performance nexus," Technovation, Elsevier, vol. 128(C).
    6. Giacomo Damioli & Vincent Van Roy & Daniel Vertesy, 2021. "The impact of artificial intelligence on labor productivity," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 1-25, March.
    7. Lynn Wu & Bowen Lou & Lorin M. Hitt, 2025. "Innovation Strategy After IPO: How AI Analytics Spurs Innovation After IPO," Management Science, INFORMS, vol. 71(3), pages 2360-2389, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Flavio Calvino & Luca Fontanelli, 2025. "Decoding AI: Nine facts about how firms use artificial intelligence in France," LEM Papers Series 2025/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Maha Kalai & Hamdi Becha & Kamel Helali, 2024. "Effect of artificial intelligence on economic growth in European countries: a symmetric and asymmetric cointegration based on linear and non-linear ARDL approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 13(1), pages 1-37, December.
    3. Flavio Calvino & Luca Fontanelli, 2026. "Decoding AI: an early look at how French firms use AI," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 16(1), pages 51-93, March.
    4. Zhao, Lang & Xu, Jiawei & Zhang, Baofeng & Lu, Jianjun, 2026. "Leveraging AI to enhance firms’ resource efficiency: ecological modernization theory and resource-based view perspectives," International Journal of Production Economics, Elsevier, vol. 291(C).
    5. Nils Grashof & Alexander Kopka, 2023. "Widening or closing the gap? The relationship between artificial intelligence, firm-level productivity and regional clusters," Bremen Papers on Economics & Innovation 2304, University of Bremen, Faculty of Business Studies and Economics.
    6. David Kerr & Katherine Taken Smith & Lawrence Murphy Smith & Tian Xu, 2025. "A Review of AI and Its Impact on Management Accounting and Society," JRFM, MDPI, vol. 18(6), pages 1-22, June.
    7. Costa, Alessandra & Crupi, Antonio & Cesaroni, Fabrizio & Abbate, Tindara, 2025. "Exploring the role of artificial intelligence in addressing sustainable development. A semantic analysis of AI patents," Technovation, Elsevier, vol. 148(C).
    8. Chenxi Zhang & DanDan Liu & Longzheng Du & Jun He & Hui Wang, 2024. "Can informatization improve urban entrepreneurial activity? Evidence from China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    9. Xing, Xiaoqiang & Zhang, Zhu & He, Weixuan, 2026. "AI technology, AI narrative, and firm value," Technovation, Elsevier, vol. 149(C).
    10. Torrent-Sellens, Joan & Enache-Zegheru, Mihaela & Ficapal-Cusí, Pilar, 2025. "Twin transitions or a meeting of strangers? Unravelling the effects of AI and innovations on economic, social and environmental MSMEs sustainability," Technology in Society, Elsevier, vol. 81(C).
    11. Bäck, Asta & Hajikhani, Arash & Jäger, Angela & Schubert, Torben & Suominen, Arho, 2022. "Return of the Solow-paradox in AI? AI-adoption and firm productivity," Papers in Innovation Studies 2022/1, Lund University, CIRCLE - Centre for Innovation Research.
    12. Fraccastoro, Dr Sara & Vanninen, Dr Heini & Gabrielsson, Prof Mika, 2025. "Two decades of research on digitalization, entrepreneurship, and internationalization: What foundations do they provide for research on digital entrepreneurial internationalization?," International Business Review, Elsevier, vol. 34(4).
    13. Park, Gangmin & Kang, Songhee & Yi, Sangyoon & Kim, Junyoun, 2026. "Diverse impacts of AI investments on productivity gains: Effects of industry and innovation characteristics," Technological Forecasting and Social Change, Elsevier, vol. 224(C).
    14. Tao Chen & Shuwen Pi & Qing Sophie Wang, 2025. "Artificial Intelligence and Corporate Investment Efficiency: Evidence from Chinese Listed Companies," Working Papers in Economics 25/05, University of Canterbury, Department of Economics and Finance.
    15. Schweizer, Lars & Patzelt, Holger, 2012. "Employee commitment in the post-acquisition integration process: The effect of integration speed and leadership," Scandinavian Journal of Management, Elsevier, vol. 28(4), pages 298-310.
    16. Patzelt, Holger & zu Knyphausen-Aufseß, Dodo & Fischer, Heiko T., 2009. "Upper echelons and portfolio strategies of venture capital firms," Journal of Business Venturing, Elsevier, vol. 24(6), pages 558-572, November.
    17. Hsu, David H., 2007. "Experienced entrepreneurial founders, organizational capital, and venture capital funding," Research Policy, Elsevier, vol. 36(5), pages 722-741, June.
    18. Joan Torrent‐Sellens & Mihaela Enache‐Zegheru & Pilar Ficapal‐Cusí, 2025. "Promoting the European Sustainable Firm: How Economic, Social, and Green Innovation and the AI‐Based Technologies Create Pathways of Social and Environmental Sustainability," Business Strategy and the Environment, Wiley Blackwell, vol. 34(7), pages 9093-9119, November.
    19. Czarnitzki, Dirk & Fernández, Gastón P. & Rammer, Christian, 2023. "Artificial intelligence and firm-level productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 188-205.
    20. Eden S. Blair, 2010. "What You Think Is Not What You Think: Unconsciousness and Entrepreneurial Behavior," Chapters, in: Angela A. Stanton & Mellani Day & Isabell M. Welpe (ed.), Neuroeconomics and the Firm, chapter 3, Edward Elgar Publishing.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325007500. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.