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

Abstract

ABSTRACT Artificial 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.