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Artificial Intelligence and Industrial Innovation: Evidence from Firm-Level Data

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  • Christian Rammer
  • Gastón P Fernández
  • Dirk Czarnitzki

Abstract

Artificial Intelligence (AI) represents a set of techniques that enable new ways of innovation and allows firms to offer new features of products and services, to improve production, marketing and administration processes, and to introduce new business models. This paper analyses the extent to which the use of AI contributes to the innovation performance of firms. Based on firmlevel data from the German part of the Community Innovation Survey (CIS) 2018, we examine the contribution of different AI methods and applications to product and process innovation outcomes. The representative nature of the survey allows extrapolating the findings to the macroeconomic level. The results show that 5.8% of firms in Germany were actively using AI in their business operations or products and services in 2019. The use of AI generated additional sales with world-first product innovations in these firms of about €16 billion, which corresponds to 18% of total sales of world-first innovations in the German business sector. Firms that developed AI by combining in-house and external resources obtained significantly higher innovation results. The same is true for firms that apply AI in a broad way and have already several years of experience in using AI.

Suggested Citation

  • Christian Rammer & Gastón P Fernández & Dirk Czarnitzki, 2021. "Artificial Intelligence and Industrial Innovation: Evidence from Firm-Level Data," Working Papers of Department of Economics, Leuven 674605, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:674605
    Note: paper number MSI_2105
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    Cited by:

    1. Cho, Jaehan & DeStefano, Timothy & Kim, Hanhin & Kim, Inchul & Paik, Jin Hyun, 2023. "What's driving the diffusion of next-generation digital technologies?," Technovation, Elsevier, vol. 119(C).
    2. Rammer, Christian, 2022. "Measuring process innovation output: Results from firm-level panel data," ZEW Discussion Papers 22-002, ZEW - Leibniz Centre for European Economic Research.
    3. Czarnitzki, Dirk & Fernández, Gastón P. & Rammer, Christian, 2023. "Artificial intelligence and firm-level productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 188-205.
    4. Rammer, Christian & Krieger, Bastian & Peters, Bettina, 2022. "Studie zu den Treibern und Hemmnissen der Innovationstätigkeit im deutschen Mittelstand," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 270421.
    5. Alessandro Sterlacchini, 2022. "AI Patenting and Employment: Evidence from the World's Top R&D Investors," Working Papers 462, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    6. Davide Antonioli & Alberto Marzucchi & Francesco Rentocchini & Simone Vannuccini, 2022. "Robot Adoption and Innovation Activities (last revised: December 2023)," Munich Papers in Political Economy 21, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    7. Matheus Eduardo Leusin, 2022. "The Development of Al in Multinational Enterprises - Effects upon Technological Trajectories and Innovation Performance," Bremen Papers on Economics & Innovation 2201, University of Bremen, Faculty of Business Studies and Economics.

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    More about this item

    Keywords

    Artificial Intelligence; Innovation; CIS data; Germany;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management

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