Does Artificial Intelligence Lower Experimentation Costs

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Does Artificial Intelligence Lower Experimentation Costs for New Entrepreneurs?

, Finance PhD Student
Sixun Tang, Joint Program in Finance and Economics PhD student

This work in progress examines the impact of artificial intelligence (AI) on entrepreneurship, focusing on the introduction of ChatGPT as a transformative moment for AI accessibility. We develop an industry-level measure of AI Task Exposure, capturing the extent to which AI can complement industry-specific tasks. Using a difference-in-differences framework with continuous treatment intensity, we analyze the effect of AI accessibility on firm formation in U.S. industries between 2021Q4 and 2023Q3. Our findings indicate that industries with greater AI Task Exposure experienced a significant increase in new firm creation following the release of ChatGPT, while firm dissolution rates remained unchanged. The results hold across different levels of industry aggregation and are robust to alternative specifications. At the individual level, workers in AI-compatible occupations were more likely to transition into self-employment post-ChatGPT. We then lay out and are currently working on testing 6 potential mechanisms linking AI availability to self-employment choice and firm formation.