The rise of artificial intelligence (AI) in recent years has led to its widespread adoption in business operations, among both tech giants and more traditional enterprises. At the same time, uncertainty shocks such as the COVID-19 pandemic and climate change are affecting firm performance. Drawing together these trends, HKUST’s Miaozhe Han and co-researchers shed light on the effect of AI on firm resilience to such shocks.

“Most existing literature focuses on AI value in normal times,” the researchers observe. “However, given the current high-velocity environment characterized by disruptive upheavals […], a better understanding of how to deal with such unrest becomes more urgent.” Defining firm resilience as the ability to quickly resume normal operations after an external shock, they used firms’ stock returns to determine whether those with higher AI investments are better able to withstand uncertainty.

Focusing on U.S. public companies that do not produce AI technologies, their results revealed that “firms with higher AI intensity have more moderate loss and more positive returns compared with peers with lower AI intensity.” This demonstrates that investing in AI does indeed improve firm resilience.

Further analyses showed a “greater potential for employing AI among under-performing firms.” In the researchers’ words, “the realized productivity [of these firms] is notably restrained due to a lack of complementary organizational designs.” This reveals an urgent issue to be solved. Moreover, the observed effects of AI were not consistent for firms operating in the service industry and those producing AI technologies, nor in the face of technological shocks.

Their findings have important managerial implications for current AI applications and for future research, demonstrating the positive impact of corporate AI investments in the face of uncertainty shocks. “By increasing labor productivity and capital responsiveness, AI furnishes resilience for firms during rough times,” the researchers conclude.