(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)
Source: Christian Rammer, Gastón P. Fernández, and Dirk Czarnitzki, “Artificial intelligence and industrial innovation: Evidence from firm-level data,” ZEW Discussion Papers, No. 21-036, 2021 — Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim.
Commentary: Artificial intelligence is a relatively new technology that firms can use to improve operations and to innovate. But the costs and complexities of AI suggest that it is easier and more economical for larger firms to use. A new study of Germany firms has found that firms with more than 1,000 employees are almost 10 times more likely to use AI than firms with 5 to 10 employees. Moreover, among large firms, those using AI represent 66 percent of sales. The study found that AI use was associated with 18 percent higher sales of innovative products or services. To the extent smaller firms use AI, they are likely to buy AI-enabled services from larger firms.