AI as "Co-founder": GenAI for Entrepreneurship
Junhui Jeff Cai, Xian Gu, Liugang Sheng, Mengjia Xia, Linda Zhao, Wu Zhu

TL;DR
This study examines how the release of ChatGPT in 2022 acted as a shock that increased small firm creation in China, especially among AI-related and first-time entrepreneurs, highlighting GenAI's role in fostering competition.
Contribution
It provides empirical evidence that GenAI significantly boosts small firm formation and shifts entrepreneurial activity, especially among AI-related and first-time entrepreneurs, in China.
Findings
Small firms' entry increased by 6.0% nationally due to GenAI.
Large-firm entry declined, indicating a shift toward leaner startups.
Effects were strongest among AI-related, less financed, and first-time entrepreneurs.
Abstract
This paper studies whether, how, and for whom generative artificial intelligence (GenAI) facilitates firm creation. Our identification strategy exploits the November 2022 release of ChatGPT as a global shock that lowered start-up costs and leverages variations across geo-coded grids with differential pre-existing AI-specific human capital. Using high-resolution and universal data on Chinese firm registrations by the end of 2024, we find that grids with stronger AI-specific human capital experienced a sharp surge in new firm formationdriven entirely by small firms, contributing to 6.0% of overall national firm entry. Large-firm entry declines, consistent with a shift toward leaner ventures. New firms are smaller in capital, shareholder number, and founding team size, especially among small firms. The effects are strongest among firms with potential AI applications,…
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Taxonomy
TopicsFirm Innovation and Growth · Entrepreneurship Studies and Influences · Private Equity and Venture Capital
