Fintech Thrust Seminar | Automation Induced Innovation Shift  

Automation Induced Innovation Shift

Abstract: 

This paper studies the impact of robot exposure on firms' innovation activities. We measure a firm's innovations as its patent number distribution in technology fields. First, at the firm level, firms with high robot exposure experience a significant rise in R\&D expenditure but a decline in the number of patent innovations in the following years. Associated with the innovation decline, we further show that firms with high robot exposure witness a decline in technology similarity over time and significantly shift their innovative activities from the incumbent fields to AI-oriented ones. This automation-induced innovation shift has become more significant for firms with AI-related research experience. Furthermore, AI parents are more costly than non-AI patents in various dimensions, including team size, researchers' labor input, patents' originality and generality, and inventors' originality. Finally, we present a dynamic equilibrium model to explore how automation induces innovation shift.