AI as Shared Business Infrastructure: Firm Growth and the Distribution of Gains

Generative AI improves performance on individual tasks, but whether those gains translate into firm growth, and for which firms, remains an open question. We study a leading Chinese e-commerce platform that in 2024 embedded a generative AI system in the operating software firms use to run their businesses, drawing on centrally developed models and platform-wide data to deliver ready-to-use applications to every firm. Complete records of each firm’s AI use, linked to its monthly operations and sales, let us trace adoption through changes in business capabilities, such as reaching customers and introducing new products, to sales growth. Using a matched difference-in-differences design and focusing on firms with annual sales below RMB 5 million, we find that adoption raises monthly sales by 51.6%, primarily through a 47.0% increase in the number of orders; instrumental-variable estimates confirm these results. Adopters reach more customers, update their product lines faster, and deliver better product and service quality, with the largest proportional gains for the smallest firms. Two mechanisms help explain the results. First, AI lowers the cost of routine work: adopters produce more product content and change listings more often while spending less staff time per order, and the gains are largest for firms that faced the highest costs relative to sales before adoption. Second, AI reduces information frictions: adopters post richer product information, and the gains are largest in markets where demand is hard to predict and matching quality is poor, especially for small firms. At the market level, product categories with greater pre-existing information frictions see more sales by existing firms, more entry, and more new products. AI expands markets rather than merely shifting sales from non-adopters to adopters.