• https://doi.org/10.1080/10438599.2026.2646221Copy DOI Icon

Starting up AI

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Abstract

ABSTRACT Using novel comprehensive administrative micro data on business applications in the United States over the period 2004–2023, we examine the characteristics of business applications and resulting startups that aim to develop Artificial Intelligence (AI) technologies or use AI in providing goods and services. AI-related applications begin rising around 2012, accelerate after 2016, and surge in 2023, consistent with major advances in AI technologies around these years. This growth is highly uneven across states and sectors. AI applications are more likely to come from corporations, transition to startups at higher rates, and anticipate greater initial employment than other applications. Startups originating from these applications achieve higher employment and revenue, but have a lower survival rate, reflecting an ‘up-or-out' dynamic. Despite higher revenue, they exhibit a higher labor share and do not have higher labor productivity. The patterns suggest an accelerating AI diffusion through new business formation and a growing contribution from AI-related startups to business dynamism.

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