Crafting an AI Compass : The Influence of Global AI Standards on Firms

The adoption and commercialization of new technologies rely heavily on universally accepted principles, known as standards. Surprisingly, the role of standards in shaping business outcomes is largely unexplored. This paper provides an initial examination of how the standardization of artificial intelligence (AI) influences business outcomes. By leveraging hand-collected data on global AI standards, we offer insights into their formulation and content, along with highlighting the countries that are at the forefront of or falling behind in global AI standardization efforts. Our findings reveal that establishing universal rules and guidelines for AI has a significant impact on corporate investment. Standardization of machine learning methods, programming languages, protocols for big data, guidelines for data interchange, and interoperability of industrial data fuel capital and R&D investments. Conversely, frameworks for societal and privacy considerations in AI have distortionary effects. Overall, AI standards have a positive 'ripple effect' on firm value, gradually amplifying as the standards mature and their impact on firms deepens