Parent-firm AI Adoption and Foreign Subsidiary Performance
DOI:
https://doi.org/10.6918/IJOSSER.202607_9(7).0014Keywords:
Artificial intelligence, Foreign subsidiaries, Subsidiary performance, Knowledge transfer, Multinational enterprises.Abstract
This paper examines whether artificial intelligence (AI) adoption by parent firms improves the performance of foreign subsidiaries. Using a matched panel of Chinese A-share listed parent firms and overseas subsidiaries during 2018-2024, we link annual-report-based AI adoption to subsidiary return on assets. Fixed-effects estimates show a positive relationship between parent-firm AI adoption and subsidiary performance. Two instrumental-variable strategies, based on peer adoption and a shift-share design, support the main result, although the shift-share estimate is less precise. Mechanism tests suggest that AI adoption improves performance partly through stronger inventory discipline. The effect is weaker in faster-growing host economies and stronger in resource-dependent host economies.
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