Data-intensive Innovation and the State: Evidence from AI Firms in China
Developing AI technology requires data. In many domains, government data far exceeds in magnitude and scope data collected by the private sector, and AI firms often gain access to such data when providing services to the state. We argue that such access can stimulate commercial AI innovation in part because data and trained algorithms are shareable across government and commercial uses. We gather comprehensive information on firms and public security procurement contracts in China’s facial recognition AI industry. We quantify the data accessible through contracts by measuring public security agencies’ capacity to collect surveillance video. Using a triple-differences strategy, we find that data-rich contracts, compared to data-scarce ones, lead recipient firms to develop significantly and substantially more commercial AI software. Our analysis indicates a contribution of government data to the rise of China’s facial recognition AI firms, and suggests that states’ data collection and provision policies could shape AI innovation.
We are especially grateful for the extraordinary research assistance provided by Haoran Gao, Andrew Kao, Shuhao Lu, and Wenwei Peng. We also thank Shiyun Hu, Junxi Liu, Shengqi Ni, Yucheng Quan, Linchuan Xu, Peilin Yang, and Guoli Yin, for their excellent work as research assistants as well. Many appreciated suggestions, critiques and encouragement were provided by Daron Acemoglu, Dominick Bartelme, Ryan Bubb, Paco Buera, Ernesto Dal Bó, Dave Donaldson, Ruben Enikolopov, Raquel Fernández, Richard Freeman, Chad Jones, Pete Klenow, Monica Martinez-Bravo, Andy Neumeyer, Juan Pablo Nicolini, Arianna Ornaghi, Maria Petrova, Torsten Persson, Nancy Qian, Andrei Shleifer, Chris Tonetti, Dan Trefler, John Van Reenen, and Daniel Xu, as well as many seminar and conference participants. Yuchtman acknowledges financial support from the British Academy under the Global Professorships program. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Martin Beraja & David Y Yang & Noam Yuchtman, 2023. "Data-intensive Innovation and the State: Evidence from AI Firms in China," The Review of Economic Studies, vol 90(4), pages 1701-1723. citation courtesy of