The Impact of AI Technology on Firms Service Innovation in Business

Artificial Intelligence has emerged as the driving force for firms’ innovation and enhanced operational efficiency of the businesses. The aim of this paper is to identify the ever-arching role of Artificial Intelligence (AI) in fostering service innovation in firms in Germany. Using the data from Mannheim Innovation Panel (MIP) dataset MIP 2021, we employed the logistic regression via STATA to explore the role of AI, internal R&D, external R&D, and cooperation with other firms on the firms’ service innovation in Germany. Some control variables are used to account for firm size, education, and training in the firms. The empirical results reveal that internal and external R&D have a positive and significant impact on service innovation while cooperation does not play such a role. However, these interactions change their impact on service innovation when embodied with artificial intelligence. We found that AI positively significantly moderates the impact of cooperation on service innovation. However, the AI moderation impact got insignificant in case of internal and external R&D. This study offers policy implications for service firms.