Threats or Opportunities? Enhancing Business Performance in the Era of Generative AI

Abstract

Despite Generative AI’s emerging prominence in the business community, its nascent nature presents uncertainties that impede its broader adoption as a disruptive technology. This paper investigates two pertinent conundrums with theoretical and managerial implications. The first pertains to the potential tension surrounding the adoption of Generative AI: is it financially viable for organizations to adopt Generative AI? Organizations might be reluctant to invest without clear financial benefits. The second concerns the role of complementary assets in amplifying the financial benefits brought about Generative AI. In response to these concerns, we conducted a randomized field experiment with a global online tutoring and learning platform. The study yielded three primary findings. First, we not only find a positive spillover effect of Generative AI on existing services, dampening the concern that Generative AI may supplant a firm’s existing services but also support the presence of complementary assets such as an idiosyncratic proprietary database amplifying the beneficial impact of Generative AI. Second, Generative AI increases advertising impression revenues, an effect that is further magnified when used in conjunction with the unique proprietary database. Third, our analysis shows that these effects are enduring, which implies that the proprietary database is an integral, socially complex, and causally ambiguous resource, instrumental in fostering a sustainable competitive edge. We conclude by affirming that our findings align with and contribute to the resource-based view of the firm and the dynamic capabilities perspective.