Artificial Intelligence, Firm Growth, and Product Innovation

We study the use and economic impact of AI technologies among US firms. We propose a new measure of firm-level AI investments, using a unique combination of job postings and worker resume datasets. Our measure reveals a stark increase in AI investments across most sectors over the past decade. Firms that invest more in AI experience faster growth in sales, employment, and market valuation. This growth is achieved primarily through increased product innovation: AI-investing firms see increased trademarks, product patents, and updates to their product portfolios. At the aggregate level, AI investments are associated with increased industry concentration and winner-take-most dynamics, as AI benefits larger firms more. Our results highlight how new technologies like AI can expand firms' investment opportunities by facilitating product innovation.