Seminar – Firm growth and the scaling intensity of AI-enabled platform and service startups

AI technologies automate increasingly complex tasks and promise new efficiencies for firms to create new market offerings and grow. However, economists argue that the complementarities of AI innovations have not yet diffused sufficiently to lead to higher scaling dynamics. We use scaling analysis to analyze the growth dynamics of the AI sector in terms of how firm revenue scales with labor and is moderated by firm-level AI investment. Specifically, we compare the impact of AI on two important modes of scaling in digital firms: (a) scaling in digital services and (b) scaling in digital platforms. We find evidence of sublinear scaling intensity for revenue as a function of labor, with neither AI-enabled service startups having a significantly higher scaling intensity than non-AI service startups, nor AI-enabled platform startups having a significantly higher scaling intensity than non-AI platform startups—indicating as-yet untapped scale benefits. Surprisingly, our study also suggests that AI-enabled startups and professional service startups generally have similar scaling intensities, while platform startups have higher scaling intensities. Our study provides new perspectives on the role of AI as an emerging technology resource that supports economies of scale and scope for startups.

Room T09-67