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AIs Structural Impact on Indias Knowledge Intensive Startup Ecosystem: A Natural Experiment in Firm Efficiency and Design

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  • Venkat Ram Reddy Ganuthula
  • Ramesh Kuruva

Abstract

This study explores the structural and performance impacts of artificial intelligence (AI) adoption on Indias knowledge intensive startups, spanning information technology, financial technology, health technology, and educational technology, founded between 2016 and 2025. Using a natural experiment framework with the founding year as an exogenous treatment proxy, it examines firm size, revenue productivity, valuation efficiency, and capital utilization across pre AI and AI era cohorts. Findings reveal larger structures and lower efficiency in AI era firms, supported by a dataset of 914 cleaned firms. The study offers insights into AIs transformative role, suggesting that while AI era firms attract higher funding and achieve higher absolute valuations, their per employee productivity and efficiency ratios are lower, potentially indicating earlystage investments in technology that have yet to yield proportional returns. This informs global entrepreneurial strategies while highlighting the need for longitudinal research on sustainability.

Suggested Citation

  • Venkat Ram Reddy Ganuthula & Ramesh Kuruva, 2025. "AIs Structural Impact on Indias Knowledge Intensive Startup Ecosystem: A Natural Experiment in Firm Efficiency and Design," Papers 2507.19775, arXiv.org.
    • Handle: RePEc:arx:papers:2507.19775
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