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Data-intensive Innovation and the State: Evidence from AI Firms in China

Author

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  • Martin Beraja
  • David Y Yang
  • Noam Yuchtman

Abstract

Developing artificial intelligence (AI) technology requires data. In many domains, government data far exceed in magnitude and scope data collected by the private sector, and AI firms often gain access to such data when providing services to the state. We argue that such access can stimulate commercial AI innovation in part because data and trained algorithms are shareable across government and commercial uses. We gather comprehensive information on firms and public security procurement contracts in China’s facial recognition AI industry. We quantify the data accessible through contracts by measuring public security agencies’ capacity to collect surveillance video. Using a triple-differences strategy, we find that data-rich contracts, compared to data-scarce ones, lead recipient firms to develop significantly and substantially more commercial AI software. Our analysis suggests a contribution of government data to the rise of China’s facial recognition AI firms, and that states’ data collection and provision policies could shape AI innovation.

Suggested Citation

  • Martin Beraja & David Y Yang & Noam Yuchtman, 2023. "Data-intensive Innovation and the State: Evidence from AI Firms in China," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(4), pages 1701-1723.
    • Handle: RePEc:oup:restud:v:90:y:2023:i:4:p:1701-1723.
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    File URL: http://hdl.handle.net/10.1093/restud/rdac056
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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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