AI Technologies and Business Value: Quantifying theMonetary Effects of AI Adoption in Firms | Claudio Falcioni

This project uses 2023 cross-sectional firm-level data on technologies in use from S&P 500 companies to estimate a quantifiable benefit of using AI for a business, an essential question in today’s world, but yet overlooked due to its recent emergence. Aggregate effects, intensive margin effects, and sector-specific effects are estimated by modeling firm value through a Cobb-Douglas OLS model with AI technologies as a factor of production. Controls include other factors of production and firm-specific characteristics to mitigate the effects of simultaneity and omitted variable bias. The findings suggest that a 1% increase in a firm’s AI adoption can be linked with an average of 0.17% increased business value. This rises to 0.2% and is more strongly observed among firms already using AI. The Healthcare, Energy, Utilities, Financial, and Real Estate sectors show sensitivity to AI adoption. An interpretation and discussion of the results is provided. This paper acts as a first step in the firm-level measurement of how AI affects value indicators, hoping that over time and with more data, a much more precise estimate and comprehensive view will be gained

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