Structure for special issue:

Variable definition:
Variable Definition
Dependent Variables
Cost of equity, estimated from CAPM model following Drobetz et al.
Patent
(2018)
Citation Cost of equity, estimated from PEG model following Chen et al. (2004)
RD costs Firm R&D Expenditure
Research Quotient Firm’s ability to generate revenue from its R&D investment (Santi., 2019)
Value on innovation The economics value of innovation constructed by Kogan., (2017)
PCW Citation-weighted patents
Independent
Variables
Dummy variable that takes on a value of one following the release of
Post different GenAI tools (e.g. The week of November 30, 2022, for ChatGPT
and the week of July 20, 2022, for image-generating AI) (Demirci., 2025)
Dummy variable denotes the innovation in the industry which is most
Treat
affected by generative AI (Hui et al., 2024).
Ai_empl Total number of employees in AI-related positions
Ai_empl_ratio Ratio of number of employees in AI-related positions to total employees
Ai_share_allai Proportion of AI-related job postings published by firms
Ai_njob_allai Proportion of new employees who have worked in AI-related industries
Ai_hotspot We define institutions that have published AI-related papers and patents as
AI innovation hotspots, and AI_distance is defined as the distance to the
AI innovation hotspot closest to the enterprise
Ai_distance Distance required to encircle a threshold number of AI publications (e.g
2500 publications) around a firm
Ai_keywords Number of AI-related terms in the business description section of the 10-K
(Chen, & Srinivasan., 2023)
Literature & reference The cost of obtaining AI-related literature (Cuntz et al., 2025)
cost
Control Variables
Size The logarithm of total assets
Lev Total liabilities / total assets
ROA Net income divided by total assets
Mfee Administrative expense ratio / agency costs
Cash Cash flow
Top1 Number of shares held by the largest shareholder / total number of shares
Inst Institutional shareholder
TobinQ (Total assets - total common equity + market equity) / by total assets
Age Age of the firm

Baseline regression:
AI to Innovation
DiD model:

Innovationi , t+ 1=β 0+ β1 Treat i∗Post t + β 2 X ¿ + α i +γ t +θ c + ε ¿ (1)

Here the subscript “i” represents the firm; “t” denotes the year and “c” donates the state. The
dependent variable, “ Innovationi , t+ 1”, measures the corporate innovation performance. It
includes Total patent and citation variable; Different types of patent number; PCW; R&D
expenditure; Research Quotient (Santi., 2019); Economics value on innovation (Kogan., 2017).
The independent variable, Post tis a dummy variable that takes on a value of one following the
release of GenAI tools (e.g. The week of November 30, 2022, for ChatGPT and the week of July
20, 2022, for image-generating AI) (Demirci., 2025). Treat i denotes the innovation in the industry
which is most affected by generative AI, for example, writing for ChatGPT, and design- and image-
focused occupations for Midjourney and DALL-E 2 (Hui et al., 2024). X ¿ is a vector of control
variables including some financial variables. We also include firm, year, and state fixed effects,
represented by α i, γ t , and θc . The term “ε” encompasses error term. We forward the dependent
variables by one period.
Time implementing Chatgpt:

OLS model:

Innovationi , t+ 1=β 0+ β1 AI i t + β 2 X ¿ + α i +γ t +θ c + ε ¿ (2)

The independent variable, AI i t is a continuous variable measuring firm AI performance including

Robustness test:
PSM method; Alternative variables; Poisson regression

Heterogeneity analysis:
Different firm tax avoidance performance (Mukherjee et al., 2017; Li et al., 2021; Qu., 2025);
Different innovation (Lev et al., 2010);
Different firm industry (e.g. Ecological industry) (Zaman et al., 2021);
Different innovation type (Breakthrough, failed…) (Akcigit, & Kerr., 2018)

Mechanism analysis:
AI (Zhang et al., 2022)- Firm ESG performance- Innovation (Long et al., 2023);
AI (Jia et al., 2024)- Employee capacity and creativity - Innovation (Liu et al., 2017); Resources
allocation
AI (Li et al., 2024)- Financial Resource Allocation- Innovation (Demirkan., 2018)
Event study:
Use event study method to explore the effects on firm innovation after AI regulation has been
implemented in US in 2023.

Further research:
Explore the further effects of firm innovation performance on investor expectations (Measured
by ). (Zaman et al., 2021; Tsang et al., 2023)/ Investor coverage and forecasts (Choi et al., 2024;
Shanthikumar, & Yoo., 2024)

Reference:
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Demirkan, I. (2018). The impact of firm resources on innovation. European Journal of Innovation
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