Paper Number
ICIS2025-1583
Paper Type
Complete
Abstract
Although Artificial Intelligence (AI) holds great promise for enhancing innovation and productivity, many firms struggle to realize its benefits. We investigate why some firms succeed with AI while others do not, focusing on the evolving compatibility between AI and a firm’s core technological domains, termed “domain AI readiness”. Using panel data on Chinese listed firms from 2016 to 2022, we examine how the interaction between firm-level AI capabilities and domain AI readiness affects firm performance. We measure domain AI readiness based on the co-occurrence of four-digit International Patent Classification (IPC4) codes in AI patents. Our findings reveal a strong complementarity: AI capabilities yield greater productivity and innovation gains when deployed in domains with higher AI readiness, whereas benefits are limited in domains that are technologically unprepared or already obsolete. Further analysis shows that this complementarity is driven by external advances in domain-AI integration, rather than firms’ internal strategic pivots.
Recommended Citation
Zeng, Sipeng; Wang, Gavin; and Sun, Tianshu, "Artificial Intelligence, Domain AI Embeddedness, and Firm Productivity" (2025). ICIS 2025 Proceedings. 8.
https://aisel.aisnet.org/icis2025/general_topic/general_topic/8
Artificial Intelligence, Domain AI Embeddedness, and Firm Productivity
Although Artificial Intelligence (AI) holds great promise for enhancing innovation and productivity, many firms struggle to realize its benefits. We investigate why some firms succeed with AI while others do not, focusing on the evolving compatibility between AI and a firm’s core technological domains, termed “domain AI readiness”. Using panel data on Chinese listed firms from 2016 to 2022, we examine how the interaction between firm-level AI capabilities and domain AI readiness affects firm performance. We measure domain AI readiness based on the co-occurrence of four-digit International Patent Classification (IPC4) codes in AI patents. Our findings reveal a strong complementarity: AI capabilities yield greater productivity and innovation gains when deployed in domains with higher AI readiness, whereas benefits are limited in domains that are technologically unprepared or already obsolete. Further analysis shows that this complementarity is driven by external advances in domain-AI integration, rather than firms’ internal strategic pivots.
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