IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v75y2025icp676-688.html

Cross-border data flows and AI adoption: Agent-based model simulations

Author

Listed:
  • Klügl, Franziska
  • Nordås, Hildegunn Kyvik

Abstract

This paper develops a dynamic Agent Based Model to study the role of cross-border data flows for the joint uptake of artificial intelligence enabled software in manufacturing and engineering. The model features two technology-related business models: engineering as a face-to-face consultancy service, and engineering as a software licensing service. Engineering agents harvest data from their software clients in the home country and abroad and use the data for quality assurance and software updates. We compare scenarios along two dimensions: (i) harvesting data from own clients only versus from open data repositories, (ii) the strength of competition measured by the probability that a contract will be extended by another period. We find that restrictions on cross-border data flows slow down the speed of adoption considerably, particularly in small countries. The simulations generate an S-shaped technology uptake path for manufacturers and a U-shaped relationship between competition and technology uptake in engineering. Interestingly, cross-border data flows flatten the U.

Suggested Citation

  • Klügl, Franziska & Nordås, Hildegunn Kyvik, 2025. "Cross-border data flows and AI adoption: Agent-based model simulations," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 676-688.
    • Handle: RePEc:eee:streco:v:75:y:2025:i:c:p:676-688
    DOI: 10.1016/j.strueco.2025.10.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X25001651
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2025.10.009?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. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Marcos J Ribeiro & Klaus Prettner, 2025. "The Skill Premium Across Countries in the Era of Industrial Robots and Generative AI," Department of Economics Working Papers wuwp381, Vienna University of Economics and Business, Department of Economics.
    3. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    4. Joshua Paul Meltzer, 2015. "The Internet, Cross-Border Data Flows and International Trade," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 2(1), pages 90-102, January.
    5. Javier López González & Chiara Del Giovane & Janos Ferencz, 2025. "A Preliminary Mapping of Measures Affecting the Cross-Border Flow of Non-Personal Data," OECD Trade Policy Papers 295, OECD Publishing.
    6. Stoneman, Paul & Kwon, Myung-Joong, 1994. "The Diffusion of Multiple Process Technologies," Economic Journal, Royal Economic Society, vol. 104(423), pages 420-431, March.
    7. Stoneman, Paul & Kwon, Myung Joong, 1996. "Technology Adoption and Firm Profitability," Economic Journal, Royal Economic Society, vol. 106(437), pages 952-962, July.
    8. Mira Burri & Rodrigo Polanco, 2020. "Digital Trade Provisions in Preferential Trade Agreements: Introducing a New Dataset," Journal of International Economic Law, Oxford University Press, vol. 23(1), pages 187-220.
    9. Diego A. Comin & Martí Mestieri, 2010. "An Intensive Exploration of Technology Diffusion," NBER Working Papers 16379, National Bureau of Economic Research, Inc.
    10. Chiara Bellucci & Stela Rubínová & Roberta Piermartini, 2025. "Better Together: How Digital Connectivity and Regulation Reduce Trade Costs," Review of International Economics, Wiley Blackwell, vol. 33(3), pages 796-814, August.
    11. Kunst, David & Freeman, Richard B. & Oostendorp, Remco, 2022. "Occupational Skill Premia around the World: New Data, Patterns and Drivers," Labour Economics, Elsevier, vol. 79(C).
    12. Robert L. Axtell & J. Doyne Farmer, 2025. "Agent-Based Modeling in Economics and Finance: Past, Present, and Future," Journal of Economic Literature, American Economic Association, vol. 63(1), pages 197-287, March.
    13. Potluri, Sai Rakshith & Sridhar, V & Rao, Shrisha, 2020. "Effects of data localization on digital trade: An agent-based modeling approach," Telecommunications Policy, Elsevier, vol. 44(9).
    14. Diego Comin & Bart Hobijn, 2010. "An Exploration of Technology Diffusion," American Economic Review, American Economic Association, vol. 100(5), pages 2031-2059, December.
    15. Franziska Klügl & Hildegunn Kyvik Nordås, 2024. "Double whammy? Trade and automation in engineering services," Review of International Economics, Wiley Blackwell, vol. 32(4), pages 1493-1520, September.
    16. Wael Hadid & Satoshi Horii & Akinori Yokota, 2025. "Artificial intelligent technologies in Japanese manufacturing firms: an empirical survey study," International Journal of Production Research, Taylor & Francis Journals, vol. 63(1), pages 193-219, January.
    17. Kristina McElheran & J. Frank Li & Erik Brynjolfsson & Zachary Kroff & Emin Dinlersoz & Lucia Foster & Nikolas Zolas, 2024. "AI adoption in America: Who, what, and where," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(2), pages 375-415, March.
    18. Mark Doms, 2004. "The boom and bust in information technology investment," Economic Review, Federal Reserve Bank of San Francisco, pages 19-34.
    19. Frank, Alejandro Germán & Dalenogare, Lucas Santos & Ayala, Néstor Fabián, 2019. "Industry 4.0 technologies: Implementation patterns in manufacturing companies," International Journal of Production Economics, Elsevier, vol. 210(C), pages 15-26.
    20. Marius F. Niculescu & D. J. Wu & Lizhen Xu, 2018. "Strategic Intellectual Property Sharing: Competition on an Open Technology Platform Under Network Effects," Information Systems Research, INFORMS, vol. 29(2), pages 498-519, June.
    21. Kinkel, Steffen & Baumgartner, Marco & Cherubini, Enrica, 2022. "Prerequisites for the adoption of AI technologies in manufacturing – Evidence from a worldwide sample of manufacturing companies," Technovation, Elsevier, vol. 110(C).
    22. Erik Marel & Martina Francesca Ferracane, 2021. "Do data policy restrictions inhibit trade in services?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(4), pages 727-776, November.
    23. Joshua Paul Meltzer, 2015. "The Internet, Cross-Border Data Flows and International Trade," Asia and the Pacific Policy Studies 201508, Crawford School of Public Policy, The Australian National University.
    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. Cantono, Simona, 2012. "Unveiling diffusion dynamics: an autocatalytic percolation model of environmental innovation diffusion and the optimal dynamic path of adoption subsidies," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201222, University of Turin.
    2. Nicholas Bloom & John Van Reenen & Heidi Williams, 2019. "A toolkit of policies to promote innovation," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 10.
    3. Napolitano, Oreste & Foresti, Pasquale & Kounetas, Konstantinos & Spagnolo, Nicola, 2023. "The impact of energy, renewable and CO2 emissions efficiency on countries’ productivity," Energy Economics, Elsevier, vol. 125(C).
    4. Wang, Yong, 2022. "Market structure, factor endowment, and technology adoption," Research in International Business and Finance, Elsevier, vol. 63(C).
    5. Qinqin Wu & Mengjie Bi & Faiza Siddiqui & Yao Tang, 2023. "Assessing the Impact of Digital Trade on Enterprise Competitiveness: Evidence from Chinese A-Share Listed Companies," Journal of Industry, Competition and Trade, Springer, vol. 23(3), pages 329-362, December.
    6. Rabah Arezki & Rachel Yuting Fan & Ha Nguyen, 2021. "Technology adoption and the middle‐income trap: Lessons from the Middle East and East Asia," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1711-1740, August.
    7. Fonseca, Tiago & Lagdami, Khanssa & Schröder-Hinrichs, Jens-Uwe, 2021. "Assessing innovation in transport: An application of the Technology Adoption (TechAdo) model to Maritime Autonomous Surface Ships (MASS)," Transport Policy, Elsevier, vol. 114(C), pages 182-195.
    8. Çağatay Bircan & Ralph De Haas, 2020. "The Limits of Lending? Banks and Technology Adoption across Russia," The Review of Financial Studies, Society for Financial Studies, vol. 33(2), pages 536-609.
    9. Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Truger, Achim & Wieland, Volker, 2019. "Den Strukturwandel meistern. Jahresgutachten 2019/20 [Dealing with Structural Change. Annual Report 2019/20]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201920.
    10. Klügl, Franziska & Kyvik Nordås, Hildegunn, 2021. "AI-enabled Automation, Trade, and the Future of Engineering Services," Working Papers 2021:16, Örebro University, School of Business.
    11. Nicholas Bloom & Tarek Alexander Hassan & Aakash Kalyani & Josh Lerner & Ahmed Tahoun, 2021. "The diffusion of disruptive technologies," CEP Discussion Papers dp1798, Centre for Economic Performance, LSE.
    12. Zara Contractor & Germ'an Reyes, 2025. "Generative AI in Higher Education: Evidence from an Elite College," Papers 2508.00717, arXiv.org, revised Apr 2026.
    13. Koellinger, Ph.D. & Schade, C., 2010. "The Influence of Installed Technologies on Future Adoption Decisions: Empirical Evidence from E-Business," ERIM Report Series Research in Management ERS-2010-012-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    14. Guillaume Edou Tchidi & Wei Zhang, 2025. "Mediating effect of financial inclusion on FinTech innovations and economic development in West Africa: Evidence from the Benin Republic," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1032-1048, April.
    15. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    16. Shi, Yuwei & Herniman, John, 2023. "The role of expectation in innovation evolution: Exploring hype cycles," Technovation, Elsevier, vol. 119(C).
    17. Skare, Marinko & Soriano, Domingo Riberio, 2021. "Technological and knowledge diffusion link: An international perspective 1870–2019," Technology in Society, Elsevier, vol. 66(C).
    18. Fernando E. Alvarez & David Argente & Francesco Lippi & Esteban Méndez & Diana Van Patten, 2023. "Strategic Complementarities in a Dynamic Model of Technology Adoption: P2P Digital Payments," NBER Working Papers 31280, National Bureau of Economic Research, Inc.
    19. Hasan, Iftekhar & Horvath, Roman & Mares, Jan, 2020. "Finance and wealth inequality," Journal of International Money and Finance, Elsevier, vol. 108(C).
    20. Dominik Paprotny, 2021. "Convergence Between Developed and Developing Countries: A Centennial Perspective," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 153(1), pages 193-225, January.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    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:streco:v:75:y:2025:i:c:p:676-688. 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/inca/525148 .

    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.