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How Would AI Regulation Change Firms’ Behavior? Evidence from Thousands of Managers

Nov 2019
Working Paper
19-031
By  Yong Suk Lee, Benjamin Larsen, Michael Webb, Mariano-Florentino Cuéllar

We examine the impacts of different proposed AI regulations on managers’ intentions to adopt AI technologies and on their AI-related business strategies. We conduct a randomized online survey experiment on more than a thousand managers in the U.S. We randomly present managers with different proposed AI regulations, and ask them to make decisions about AI adoption, budget allocation, hiring, and other issues. We have four main findings: (1) information about AI regulation generally reduces the rate of adoption of AI technologies. Nonetheless, industry- and agency-specific AI regulation has a smaller impact than general AI regulation. (2) Information about regulation induces firms to think. That is, firms spend more on developing AI strategy and hire more managers. This is at the cost of hiring other workers and training current employees. (3) The impact of information about AI regulation on innovation differs by industry and firm size. AI regulation increases intent to file patents in the healthcare and pharmaceutical sectors, but reduces it in the retail sector. Moreover, AI regulation information reduces AI adoption in small firms and is more likely to reduce their innovative activity. (4) Information about AI regulation increases firms’ perceptions of the importance of safety and transparency issues related to AI.

Publication Keywords: 
artificial intelligence
regulation
adoption
Innovation
strategy
survey experiment