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Can startups generate a competitive advantage with open AI tools?

Author

Listed:
  • Stephen Michael Impink

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Nataliya Wright

Abstract

We examine how open source generative AI adoption affects the venture performance of high-tech software startups. Using a matched sample, we find that startups that use generative AI in open product development raise about 15% less funding, especially in competitive markets with many similar AI adopters. However, startups targeting broad markets raise roughly 30% more funding when adopting generative AI early—within six months of its release—before a dominant design emerges. These findings suggest that while early AI adoption in the open can be beneficial, widespread use may erode differentiation. Overall, these results indicate that generative AI is not a silver bullet and may even hinder fundraising when competitive advantages are easily replicated.

Suggested Citation

  • Stephen Michael Impink & Nataliya Wright, 2025. "Can startups generate a competitive advantage with open AI tools?," Working Papers hal-05384766, HAL.
    • Handle: RePEc:hal:wpaper:hal-05384766
    DOI: 10.2139/ssrn.5386212
    as

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