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GenAI investment in the industrial chain and firm breakthrough innovation

Author

Listed:
  • Yao, Yun
  • Zhang, Kaining

Abstract

Achieving breakthrough innovation is crucial for firms seeking industry leadership, with generative artificial intelligence (GenAI) serving as the core driver of the latest technological transformation. This paper examines how GenAI investment in the industrial chain influences firm breakthrough innovation. Chain-level GenAI investment is measured using upstream and downstream input-output tables, combined with industrial-level GenAI job postings. We find that GenAI investment significantly boosts breakthrough innovation: an increase in GenAI raises breakthrough innovation output by roughly 2.6 %, driven by knowledge spillover and lower operating costs. The impact is stronger when GenAI investment originates from upstream sectors. Moreover, GenAI investment reallocates resources towards breakthrough innovation rather than merely increasing invention, utility-model, or design patents. We further find that GenAI-driven breakthrough innovation subsequently reduces firms’ financing costs and increases their sales growth. These findings provide practical insights for optimizing GenAI deployment along the industrial chain and strengthening firm breakthrough innovation.

Suggested Citation

  • Yao, Yun & Zhang, Kaining, 2026. "GenAI investment in the industrial chain and firm breakthrough innovation," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325025929
    DOI: 10.1016/j.frl.2025.109343
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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