Influence of artificial intelligence applications on total factor productivity of enterprises—evidence from textual analysis of annual reports of Chinese-listed companies

ABSTRACTArtificial intelligence (AI) empowers the real economy, promotes intelligent transformation, and upgrades enterprises. However, whether AI applications improve enterprises' total factor productivity (TFP) in developing countries remains unknown. Based on a textual analysis of the annual reports of Chinese A-share listed companies, we constructed indicators to measure AI applications in companies. Furthermore, the development status and influencing factors of AI applications in Chinese enterprises were explored, and the influence of AI applications on TFP was examined. The results reveal that the probability of AI application varies across enterprises. Large enterprises with a low proportion of fixed assets and high profitability are located in highly market-oriented regions and those operating in strongly competitive industries are more likely to apply AI. AI applications can significantly increase TFP, which holds true after a series of robustness tests. This influence is heterogeneous across industries and enterprises, and the positive effects are more pronounced for producer services and high-tech manufacturing, as well as state-owned, large, and labour-intensive enterprises. AI applications increase TFP mainly through technological innovation and by replacing low-end labour.KEYWORDS: Artificial intelligencetextual analysistotal factor productivitytechnological innovationreplacement of labourJEL CLASSIFICATION: C33D12O12O33O44 Disclosure statementNo potential conflict of interest was reported by the author(s).Data availability statementThe data that support the findings of this study are available in the China Stock Market & Accounting Research Database (CSMAR) https://www.gtarsc.com/ and on the website of the Shanghai and Shenzhen Stock Exchanges http://www.sse.com.cn/, http://www.szse.cn/index/index.html.Notes1 https://cingai.nankai.edu.cn/2021/0524/c10232a366536/page.htm2 In conjunction with the 2011 OECD Technical Classification of Manufacturing and the National Economic Classification of Industries (2017), the manufacturing sector is subdivided into high and low technology manufacturing, and the service sector is subdivided into producer and consumer services.Additional informationFundingWe gratefully acknowledge financial support from the National Social Science Youth Fund of China [20CJY009], and the National Social Science Fund of China [21BJL121]. The authors remain responsible for any remaining errors or omissions.