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Paper Number
ICIS2025-1455
Paper Type
Complete
Abstract
Generative AI has transformative potential across industries, yet we know little about how it creates firm value. Building on recent research linking GenAI exposure to positive stock market valuation, we provide a more nuanced view by decomposing Exposure into three business dimensions: product, process, and customer. We further argue that Exposure alone does not guarantee actual firm value, but that Exposure has to be matched with complementary AI strategies and investments, which is strategic AI Readiness. Using an event study, we find that all three exposure dimensions positively affect firm valuation, though with varying magnitude. More importantly, Exposure alone is not sufficient: firms with both high Exposure and high Readiness experience significant value gains. Interestingly, firms with high Exposure but low Readiness exhibit insignificant value change, while firms with low Exposure but high Readiness experience significantly value decrease. These findings highlight the risks associated with premature or misaligned GenAI initiatives.
Recommended Citation
Yin, Haonan; Dewan, Sanjeev; and Ren, Fei, "Exposure, Readiness, and Firm Valuation of Generative AI" (2025). ICIS 2025 Proceedings. 10.
https://aisel.aisnet.org/icis2025/gen_ai/gen_ai/10
Exposure, Readiness, and Firm Valuation of Generative AI
Generative AI has transformative potential across industries, yet we know little about how it creates firm value. Building on recent research linking GenAI exposure to positive stock market valuation, we provide a more nuanced view by decomposing Exposure into three business dimensions: product, process, and customer. We further argue that Exposure alone does not guarantee actual firm value, but that Exposure has to be matched with complementary AI strategies and investments, which is strategic AI Readiness. Using an event study, we find that all three exposure dimensions positively affect firm valuation, though with varying magnitude. More importantly, Exposure alone is not sufficient: firms with both high Exposure and high Readiness experience significant value gains. Interestingly, firms with high Exposure but low Readiness exhibit insignificant value change, while firms with low Exposure but high Readiness experience significantly value decrease. These findings highlight the risks associated with premature or misaligned GenAI initiatives.
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12-GenAI