Park, Jaecheol, Myunghwan Lee, J. Frank Li, Gene Moo Lee “Unpacking AI Transformation: The Impact of AI Strategies on Firm Performance with a Dual Lens on Product and Process Orientation”, Work-in-Progress.

• Presentations: UBC (2024), INFORMS (2024)

Artificial intelligence (AI) technologies hold great potential for large-scale economic impact. Aligned with this trend, recent studies explore the adoption impact of AI technologies on firm performance. However, they predominantly measure AI capabilities with input (e.g., labor/job posting), neglecting to consider the strategic use of such AI input in business operations and value creation. In this paper, we empirically examine how firms’ strategic AI orientation affects firm performance with a dual-lens on product and process orientation. We create a novel firm-year-level AI orientation measure by employing a large language model to analyze business descriptions in Form 10-K filings and identify an increasing trend of AI disclosure among U.S. public firms. By further dissecting firms’ AI disclosure into AI mention and AI (product and process) orientation, our long-difference analyses show that AI orientation significantly affects costs, sales, and market value but AI mention does not, showing the importance of strategic deployment of AI to create business value. Moreover, we find the heterogeneous effects across AI product orientation and AI process orientation on performance. This study contributes to the recent AI management literature by providing the strategic role of AI orientation on firm performance.