[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ulb/ulbeco/2013-369623.html
   My bibliography  Save this paper

Make or buy your artificial intelligence? Complementarities in technology sourcing

Author

Listed:
  • Charles Hoffreumon
  • Chris CM Forman
  • Nicolas van Zeebroeck
Abstract
We investigate firm decisions to adopt artificial intelligence (AI) technology and how adoption is sourced: by purchasing commercial readymade software, by developing or customizing solutions in-house, or both. Using a cross-sectional data set of 3143 firms from across Europe, we examine the extent to which sourcing strategies exhibit complementarity or substitution. We find that adoption of AI using readymade software as a sourcing strategy is now increasingly commonplace, but differs across industrial sectors. Further, complementarities between sourcing strategies are common across sectors, though with some differences in strength and some exceptions. Our results show that sourcing strategies play an important role in shaping AI adoption decisions among firms.

Suggested Citation

  • Charles Hoffreumon & Chris CM Forman & Nicolas van Zeebroeck, 2024. "Make or buy your artificial intelligence? Complementarities in technology sourcing," ULB Institutional Repository 2013/369623, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/369623
    Note: SCOPUS: ar.j
    as

    Download full text from publisher

    File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/369623/3/jems_ch_cf_nvz.pdf
    File Function: Full text for the whole work, or for a work part
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Erik Brynjolfsson & Daniel Rock & Chad Syverson, 2021. "The Productivity J-Curve: How Intangibles Complement General Purpose Technologies," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 333-372, January.
    2. Nicholas Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2014. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," Management Science, INFORMS, vol. 60(12), pages 2859-2885, December.
    3. Chris Forman & Avi Goldfarb & Shane Greenstein, 2008. "Understanding the Inputs into Innovation: Do Cities Substitute for Internal Firm Resources?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 295-316, June.
    4. Kristina McElheran & J. Frank Li & Erik Brynjolfsson & Zachary Kroff & Emin Dinlersoz & Lucia Foster & Nikolas Zolas, 2024. "AI adoption in America: Who, what, and where," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(2), pages 375-415, March.
    5. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    6. Marco Ceccagnoli & Matthew J. Higgins & Vincenzo Palermo, 2014. "Behind the Scenes: Sources of Complementarity in R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 125-148, March.
    7. Bloom, Nicholas & Hassan, Tarek Alexander & Kalyani, Aakash & Lerner, Josh & Tahoun, Ahmed, 2021. "The diffusion of disruptive technologies," LSE Research Online Documents on Economics 113870, London School of Economics and Political Science, LSE Library.
    8. David Dranove & Chris Forman & Avi Goldfarb & Shane Greenstein, 2014. "The Trillion Dollar Conundrum: Complementarities and Health Information Technology," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 239-270, November.
    9. Arora, Ashish, 1996. "Testing for complementarities in reduced-form regressions: A note," Economics Letters, Elsevier, vol. 50(1), pages 51-55, January.
    10. Chris Forman & Avi Goldfarb & Shane Greenstein, 2012. "The Internet and Local Wages: A Puzzle," American Economic Review, American Economic Association, vol. 102(1), pages 556-575, February.
    11. Erik Brynjolfsson & Kristina McElheran, 2016. "The Rapid Adoption of Data-Driven Decision-Making," American Economic Review, American Economic Association, vol. 106(5), pages 133-139, May.
    12. Alekseeva, Liudmila & Azar, José & Giné, Mireia & Samila, Sampsa & Taska, Bledi, 2021. "The demand for AI skills in the labor market," Labour Economics, Elsevier, vol. 71(C).
    13. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    14. Prasanna Tambe, 2014. "Big Data Investment, Skills, and Firm Value," Management Science, INFORMS, vol. 60(6), pages 1452-1469, June.
    15. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2012. "Americans Do IT Better: US Multinationals and the Productivity Miracle," American Economic Review, American Economic Association, vol. 102(1), pages 167-201, February.
    16. Rosenberg, Nathan, 1963. "Technological Change in the Machine Tool Industry, 1840–1910," The Journal of Economic History, Cambridge University Press, vol. 23(4), pages 414-443, December.
    17. repec:ulb:ulbeco:2013/283916 is not listed on IDEAS
    18. Arora, Ashish & Cohen, Wesley M. & Walsh, John P., 2016. "The acquisition and commercialization of invention in American manufacturing: Incidence and impact," Research Policy, Elsevier, vol. 45(6), pages 1113-1128.
    19. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    20. Jacques Bughin & Nicolas van Zeebroeck, 2018. "Artificial intelligence: Why a digital base is critical," ULB Institutional Repository 2013/367869, ULB -- Universite Libre de Bruxelles.
    21. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    22. Aakash Kalyani & Nicholas Bloom & Marcela Carvalho & Tarek Alexander Hassan & Josh Lerner & Ahmed Tahoun, 2021. "The Diffusion of New Technologies," NBER Working Papers 28999, National Bureau of Economic Research, Inc.
    23. William R. Kerr & Ramana Nanda & Matthew Rhodes-Kropf, 2014. "Entrepreneurship as Experimentation," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 25-48, Summer.
    24. Prithwiraj Choudhury & Evan Starr & Rajshree Agarwal, 2020. "Machine learning and human capital complementarities: Experimental evidence on bias mitigation," Strategic Management Journal, Wiley Blackwell, vol. 41(8), pages 1381-1411, August.
    25. Birger Wernerfelt, 1984. "A resource‐based view of the firm," Strategic Management Journal, Wiley Blackwell, vol. 5(2), pages 171-180, April.
    26. Arora, Ashish & Gambardella, Alfonso, 1994. "Evaluating technological information and utilizing it : Scientific knowledge, technological capability, and external linkages in biotechnology," Journal of Economic Behavior & Organization, Elsevier, vol. 24(1), pages 91-114, June.
    27. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    28. Jacques Bughin & Nicolas van Zeebroeck, 2018. "Artificial intelligence: Why a digital base is critical," ULB Institutional Repository 2013/283916, ULB -- Universite Libre de Bruxelles.
    29. Sebnem Kalemli-Ozcan & Bent Sorensen & Carolina Villegas-Sanchez & Vadym Volosovych & Sevcan Yesiltas, 2015. "How to Construct Nationally Representative Firm Level Data from the Orbis Global Database: New Facts and Aggregate Implications," NBER Working Papers 21558, National Bureau of Economic Research, Inc.
    30. Peter N. Gal, 2013. "Measuring Total Factor Productivity at the Firm Level using OECD-ORBIS," OECD Economics Department Working Papers 1049, OECD Publishing.
    31. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
    32. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2005. "Productivity, Volume 3: Information Technology and the American Growth Resurgence," MIT Press Books, The MIT Press, edition 1, volume 3, number 0262101114, April.
    33. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 339-376.
    34. James Bessen, 2020. "Industry Concentration and Information Technology," Journal of Law and Economics, University of Chicago Press, vol. 63(3), pages 531-555.
    35. Peng Huang & Marco Ceccagnoli & Chris Forman & D.J. Wu, 2022. "IT Knowledge Spillovers, Absorptive Capacity, and Productivity: Evidence from Enterprise Software," Information Systems Research, INFORMS, vol. 33(3), pages 908-934, September.
    36. Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Research Policy, Elsevier, vol. 28(1), pages 63-80, January.
    37. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
    38. Jon Kleinberg & Himabindu Lakkaraju & Jure Leskovec & Jens Ludwig & Sendhil Mullainathan, 2018. "Human Decisions and Machine Predictions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(1), pages 237-293.
    39. Athey, Susan. & Stern, Scott, 1969-, 1998. "An empirical framework for testing theories about complementarity in orgaziational design," Working papers WP 4022-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    40. Sørensen, Bent E & Kalemli-Özcan, Sebnem & Volosovych, Vadym & Villegas-Sanchez, Carolina & Yesiltas, Sevcan, 2015. "How to construct nationally representative firm level data from the ORBIS global database," CEPR Discussion Papers 10829, C.E.P.R. Discussion Papers.
    41. Timothy F Bresnahan, 2019. "Technological change in ICT in light of ideas first learned about the machine tool industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(2), pages 331-349.
    42. Bruno Cassiman & Reinhilde Veugelers, 2006. "In Search of Complementarity in Innovation Strategy: Internal R& D and External Knowledge Acquisition," Management Science, INFORMS, vol. 52(1), pages 68-82, January.
    43. Young Bong Chang & Vijay Gurbaxani, 2012. "The Impact of IT-Related Spillovers on Long-Run Productivity: An Empirical Analysis," Information Systems Research, INFORMS, vol. 23(3-part-2), pages 868-886, September.
    44. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-1165, December.
    45. Arora, Ashish & Gambardella, Alfonso, 1990. "Complementarity and External Linkages: The Strategies of the Large Firms in Biotechnology," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 361-379, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hamid Etemad, 2024. "Transformative potentials of generative artificial intelligence: Should international entrepreneurial enterprises adopt GEN.AI?," Journal of International Entrepreneurship, Springer, vol. 22(2), pages 141-163, June.
    2. Thomas Licht & Klaus Wohlrabe, 2024. "AI Adoption Among German Firms," CESifo Working Paper Series 11459, CESifo.
    3. Fossen, Frank M. & McLemore, Trevor & Sorgner, Alina, 2024. "Artificial Intelligence and Entrepreneurship," IZA Discussion Papers 17055, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kristina McElheran & J. Frank Li & Erik Brynjolfsson & Zachary Kroff & Emin Dinlersoz & Lucia Foster & Nikolas Zolas, 2024. "AI adoption in America: Who, what, and where," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(2), pages 375-415, March.
    2. Erik Brynjolfsson & Wang Jin & Kristina McElheran, 2021. "The power of prediction: predictive analytics, workplace complements, and business performance," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(4), pages 217-239, October.
    3. Cassiman, Bruno & Veugelers, Reinhilde, 2007. "Are external technology sourcing strategies substitutes or complements? The case of embodied versus disembodied technology acquisition," IESE Research Papers D/672, IESE Business School.
    4. Prasanna Tambe, 2014. "Big Data Investment, Skills, and Firm Value," Management Science, INFORMS, vol. 60(6), pages 1452-1469, June.
    5. Veugelers, Reinhilde & Hottenrott, Hanna & Rexhäuser, Sascha, 2012. "Green innovations and organisational change: making better use of environmental technology," CEPR Discussion Papers 9055, C.E.P.R. Discussion Papers.
    6. Arora, Ashish & Forman, Chris & Yoon, Ji Woong, 2010. "Complementarity and information technology adoption: Local area networks and the Internet," Information Economics and Policy, Elsevier, vol. 22(3), pages 228-242, July.
    7. Hottenrott, Hanna & Rexhäuser, Sascha & Veugelers, Reinhilde, 2016. "Organisational change and the productivity effects of green technology adoption," Resource and Energy Economics, Elsevier, vol. 43(C), pages 172-194.
    8. Love, James H. & Roper, Stephen & Vahter, Priit, 2014. "Dynamic complementarities in innovation strategies," Research Policy, Elsevier, vol. 43(10), pages 1774-1784.
    9. Leiponen, Aija, . "Essays in the Economics of Knowledge: Innovation, Collaboration, and Organizational Complementarities," ETLA A, The Research Institute of the Finnish Economy, number 31, June.
    10. Schmiedeberg, Claudia, 2008. "Complementarities of innovation activities: An empirical analysis of the German manufacturing sector," Research Policy, Elsevier, vol. 37(9), pages 1492-1503, October.
    11. Edward D. Perry & GianCarlo Moschini & David A. Hennessy, 2016. "Testing for Complementarity: Glyphosate Tolerant Soybeans and Conservation Tillage," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 765-784.
    12. David Dranove & Chris Forman & Avi Goldfarb & Shane Greenstein, 2014. "The Trillion Dollar Conundrum: Complementarities and Health Information Technology," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 239-270, November.
    13. Chris Forman & Nicolas van Zeebroeck, 2012. "From Wires to Partners: How the Internet Has Fostered R&D Collaborations Within Firms," Management Science, INFORMS, vol. 58(8), pages 1549-1568, August.
    14. Resende, Marcelo & Strube, Eduardo & Zeidan, Rodrigo, 2014. "Complementarity of innovation policies in Brazilian industry: An econometric study," International Journal of Production Economics, Elsevier, vol. 158(C), pages 9-17.
    15. Zuniga, Pluvia & Crespi, Gustavo, 2013. "Innovation strategies and employment in Latin American firms," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 1-17.
    16. Bruno Cassiman & Reinhilde Veugelers, 2006. "In Search of Complementarity in Innovation Strategy: Internal R& D and External Knowledge Acquisition," Management Science, INFORMS, vol. 52(1), pages 68-82, January.
    17. Lynn Wu & Bowen Lou & Lorin Hitt, 2019. "Data Analytics Supports Decentralized Innovation," Management Science, INFORMS, vol. 65(10), pages 4863-4877, October.
    18. Babina, Tania & Fedyk, Anastassia & He, Alex & Hodson, James, 2024. "Artificial intelligence, firm growth, and product innovation," Journal of Financial Economics, Elsevier, vol. 151(C).
    19. Veugelers, Reinhilde & Cassiman, Bruno, 2002. "Complementarity in the Innovation Strategy: Internal R&D, External Technology Acquisition and Cooperation," CEPR Discussion Papers 3284, C.E.P.R. Discussion Papers.
    20. Cohen, Wesley M., 2010. "Fifty Years of Empirical Studies of Innovative Activity and Performance," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 129-213, Elsevier.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ulb:ulbeco:2013/369623. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Benoit Pauwels (email available below). General contact details of provider: https://edirc.repec.org/data/ecsulbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.