The Impact of Generative Artificial Intelligence on Innovation: Evidence From Software Products

The authors study the impact of generative artificial intelligence (GAI) tools on product-level innovation outcomes in the context of software products. Specifically, they illustrate how GAI can alter the direction of innovation by shifting the activities of developers away from generational innovation and toward original innovation, which may be new to the market but not necessarily more novel than previous innovations. They argue that this shift is driven by GAI's ability to facilitate tasks in both the ideation and implementation of software products, which enables some developers to create software products that were previously beyond their reach, while allowing others to reallocate their effort with respect to different activities. Their analyses in the context of browser add-ons provide empirical evidence for these arguments. They discuss implications for innovation research and the generalizability of their findings to other domains.