AI Adoption and Productivity of Japanese Firms: Spillover and innovation effects

Author Name IKEUCHI Kenta (Senior Fellow (Policy Economist), RIETI) / INUI Tomohiko (Faculty Fellow, RIETI) / KIM YoungGak (Senshu University)
Creation Date/NO. September 2023 23-J-034
Research Project East Asian Industrial Productivity
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The use of Artificial Intelligence (AI) in business has been expanding in recent years, and there is growing interest in the mechanisms and extent to which AI affects firm performance. In this study, we analyze the impact of firms’ introduction of AI on their performance using the "Basic Survey of Japanese Business Structure and Activities" of the Ministry of Economy, Trade and Industry (METI), Japan, TSR's business-to-business transaction data, press release data from NIKKEI, and IIP patent database 2020. In addition to the introduction of AI-related patents generated by a company's own R&D activity, we also try to analyze the impact of the introduction of AI within their trading partners (suppliers and customers). In addition to the efficiency gains in production processes (process innovation), the study analyzes the creation of new products and improvements in existing products (product innovation). The main results from the analyses are as follows.

(1) AI-related patents positively correlate with firm productivity and have a stronger relationship with productivity than non-AI patents. (2) The relationship between AI-related patents and firm productivity strengthened even after 2009 when the number of patent applications began to decline.
(3) AI-related patents mainly contribute to the productivity of firms with productivity in middle or higher status within the industry, while AI-related patents have a negative impact on the productivity of firms with low productivity.
(4) We cannot confirm that the introduction of AI by a firm's business partner has a positive or negative spillover effect on the productivity of that firm.
(5) AI-related patents are strongly related to product innovation, process innovation, and technological innovation of the firms, and especially high-quality AI-related patents have a mid-term and important impact on innovation.