Our research asks a central question for businesses investing heavily in artificial intelligence: Is AI actually making firms more productive, and if so, how? Using 15 years of data on AI-skilled employment at U.S. public firms, we find that firms increasing their AI investments experienced significantly faster productivity growth from 2018 to 2024—roughly one percentage point of additional productivity growth per year for a one-standard-deviation increase in AI investment. Importantly, these gains do not appear immediately; they build gradually over several years.
The key mechanism is organization capital: durable, firm-specific knowledge embedded in a company’s systems, processes, data, and workflows. AI appears to create the most value when firms use it not simply to automate individual tasks, but to build reusable organizational capabilities—for example, systems that codify proprietary knowledge, improve decision-making, or redesign business processes. Productivity gains are concentrated in AI jobs that build this organization capital, and are especially strong at firms that began with less of it.
Tania Babina, Associate Professor of Finance, UMD
The Review of Corporate Finance Studies