Research On The Impact Of Artificial Intelligence On Chinese Firms’ Export Product Quality

Intelligent production is an epochal proposition.It is the forthcoming direction of manufacturing industry transformation and upgrading,and it is also an important support for high-quality economic and trade development.As one of the core strategic technologies of the Fourth Industrial Revolution,artificial intelligence(AI)technology has brought another leap in productivity through integration with the manufacturing industry.While promoting productivity raise and transformation and upgrading in the manufacturing industry,artificial intelligence has also brought significant changes to the development of international trade.China has now become the world’s largest industrial robot market and the world’s largest trade exporter.It is expected that artificial intelligence will profoundly affect and change China’s trade pattern in the foreseeable future.Under the current background of China’s economy shifting from high-speed growth to high-quality development stage,high-quality development of foreign trade is particularly crucial for promoting China’s economic development and achieving the goal of structural optimization,power conversion,quality and efficiency improvement.The quality of export products represents the competitiveness of a country’s industries and enterprises in the international market.Improving the quality of export products has become an effective way to enhance the status of China’s manufacturing industry in the international market and change the current "big but not strong" status quo.And it is also an important micro-foundation for improving the quality of China’s macroeconomic growth.Using artificial intelligence technology to improve export quality can not only guarantee the economic growth,but also can win a valuable strategic buffer period for China’s construction of the "dual-circulation" development pattern.Therefore,to study the impact of artificial intelligence on the export quality of Chinese firms is of great strategic significance for China to accelerate the cultivation of new international competitive advantages in export trade,and to respond to new changes in international and domestic situations.Based on theoretical analysis,this dissertation not only examines the impact of artificial intelligence on Chinese firms’ export products,the resulting export expansion effect,competition effect,and first-mover advantage effect,etc.,but also extends the research to firms’ export stability and firms’ DVAR in exports in an attempt to better understand how artificial intelligence affects Chinese firms’ export quality,its working mechanism and extension effect,and thereby get more enlightening findings to provide Chinese firms with decision-making reference for dealing with the potential risks and challenges AI may bring while giving full play to the advantages of artificial intelligence to promote the high quality development of Chinese trade and economy.In terms of theory,under the basic framework of Dixit-Sliglitz,the idea of task model,and the theory of heterogeneous firms,this dissertation first analyzes the impact of artificial intelligence on the quality of Chinese firms’ export products,and then,centered on the quality of export products,further expounds the logical relationships among export product quality,export stability,and export DVAR,as well as the impact of artificial intelligence on export stability and DVAR,which provides a theoretical basis for the empirical analysis that follows.The conclusions drawn from theoretical analysis mainly as follows:(1)The quality of products produced and exported by a firm is endogenously determined by the profit function of the enterprise and the demand function of consumers.The firms maximize export profits by choosing the most appropriate combination of quality and price.The direct impact of artificial intelligence by firms is to increase their own productivity,which means that firms can produce products with the same utility with lower cost,or produce products with higher utility with the same cost.Therefore,the application of artificial intelligence can help improve the quality of the firms’ export products.(2)Quality is a decisive factor in the consumers’ choice of the product.The higher the quality of the product,the more favored it is by consumers,and the more stable the export will be.From a dynamic perspective,due to the existence of the discounted utility effect,the quality of the same product tends to decrease gradually over time;if the technological progress of the firm is further considered,over time,firms can produce higher-quality products and it becomes easier to produce products of the same quality,which to some extent offsets the effect of discounted utility.When the technological progress of the firm is greater than a critical value,it indicates that the replacement of the product "outperforms" the discounted utility of consumers,and consumers will continue to prefer the product;and when the technological progress is less than the critical value,it means the quality of the product continues to decline,and consumer preferences for the product will continue to decline,and the lower the quality of the product,the higher the risk of termination of the trade relationship.Therefore,artificial intelligence helps enhance the firms’ export stability by improving the quality of export products.(3)For firms,the upgrading of product quality means that a unit of investment obtains more benefits,that is,the increase of mark-ups.The higher the mark-ups,the higher the DVAR of the firm’s exports.Therefore,artificial intelligence helps improve the firm’s export DVAR through upgrading the quality of export products.In addition,export DVAR is also affected by the use of imported intermediates by the firms.The application of artificial intelligence reduces the production cost of domestic intermediates,prompting the firms to use more domestic intermediates instead of imported intermediates in production,thereby producing an import substitution effect that helps to improve export DVAR.However,the large-scale application of artificial intelligence in the industry may bring about a competitive effect.The use of artificial intelligence by other firms in the industry may reduce the product quality and markups of the firm,which is not conducive to the improvement of the company’s export D VAR.In terms of empirical evidence,this dissertation uses the matching data of China Customs Database and Chinese Industrial Enterprises Database from 2000 to 2015,and the imported industrial robots as a proxy variable for the use of artificial intelligence by manufacturing enterprises,to verify the hypotheses in the theoretical analysis.The main conclusions are as follows:(1)The empirical results show that the adoption of AI has a significantly positive effect on upgrading the quality of manufacturing firms’ products.Test on the mechanism of intermediary effect shows that the use of AI promotes the total factor productivity,and reduces the marginal costs of the firms,thus leading to an upgrade in the export product quality.Moreover,the quality upgrading effect is particularly prominent in large firms,non-high-tech firms and non-state-owned firms.Extended research from dynamic perspectives further shows that the adoption of AI could bring about a trade expansion,but that the product quality of the newly established trade relations could be relatively low;AI could also cause a redistribution of the market share,with low-quality products seizing a share from the medium and high-quality products,producing a competition effect;and it could also bring a first-move advantage,namely the enterprises that take the lead in adopting the AI early on are likely to have an advantage over those who follow them in the effect of quality upgrading.(2)The application of artificial intelligence improves the product quality of trade relations,thereby significantly reducing the probability of its failure and thus enhancing export stability.The lower the technological sophistication of the trade relations,the more obvious the enhancement effect of artificial intelligence on its export stability.After applying artificial intelligence,the firms can choose to convert cost advantages into price advantages to improve product quality in the short term,and thus enhance the stability of exports.They can also choose to convert cost advantages into technological advantages to slow down the decay rate of product quality to maintain export stability at a high level in the long run.(3)The application of artificial intelligence improves the firms’ cost markups,reduces the proportion of imported intermediate products,and thereby helps improve the firms’ DVAR in exports.Although the use of artificial intelligence by other firms in the same industry will produce competitive effect and bring obvious individual negative effects to firms with low productivity,low export product quality and low export technical sophistication,the application of artificial intelligence can have a positive impact on the export DVAR at the industry level through intensive marginal effect and reallocating effect.The innovations of this dissertation mainly include the following aspects:(1)Innovation of research perspective.Compared with the existing researches,in addition to focusing on the impact of artificial intelligence on the firms’ export quality,this dissertation also analyzes the theoretical relationships among export product quality,export stability and export DVAR through in-depth exploration of the theoretical expressions and practical measurements on product quality to further extend the study to export stability and export DVAR.On the one hand,it helps to supplement and enrich the research on the impact of artificial intelligence on firm exports;on the otherhand,it expands the derivative effects of changes in the quality of export products,highlighting the importance of export product quality,and provides a new perspective and idea for the research on export product quality.(2)Development of theoretical research.This dissertation focuses on the quality of firms’ export products,and solves the equilibrium product quality for enterprises to maximize profits by combining the profit function of firms and the demand function of consumers.Artificial intelligence is introduced into this framework for analysis,and theoretically explains the impact of artificial intelligence on the quality upgrading of export products,and the transmission mechanism.Based on the analysis of the influencing factors and derivative effects of export product quality,this dissertation makes a further innovative development of the theoretical model:By endowing export product quality with dynamic characteristics,it analyzes the impact of artificial intelligence on firms’export stability;by introducing artificial intelligence into the production function from the channel of domestic intermediate goods,it broadens the way of artificial intelligence affecting firms’ output at the theoretical level,and provides a new perspective for analyzing the impact of artificial intelligence on micro-firms.(3)Advancement of the research.While confirming that the application of artificial intelligence helps upgrade the quality of export products,this dissertation further promotes the relevant research from the firm level,confirming that application of artificial intelligence leads to competitive effects among products,and among firms,and analyzes the reasons for the competitive effects.In addition,this dissertation also finds that the price advantage brought by the application of artificial intelligence will gradually disappear with the emergence of the "crowding effect".Only by transforming the cost advantage brought by artificial intelligence into a technological advantage through R&D can the firms make full and effective use of the opportunity provided by artificial intelligence,to enjoy a high reputation in the international market with high-quality products.In terms of policy implications,according to the main conclusions of theoretical analysis and empirical evidence,this dissertation puts forward relevant suggestions from the perspectives of encouraging enterprises to introduce artificial intelligence,and formulating relevant policies to improve the positive effects of artificial intelligence and reduce the potential negative effects.At the micro-level,firms should recognize their own positioning,reasonably introduce artificial intelligence into the production processes,instead of blindly pursuing "advanced technology",and take advantage of the first-mover advantage of artificial intelligence and its more obvious effect on low-quality products to obtain more benefits from intelligent production.In addition,enterprises should increase technical innovation to convert the cost advantages brought by artificial intelligence into technical advantages,so as to avoid wasting the opportunity presented by artificial intelligence.At the macro-level,on the one hand,application and development of artificial intelligence technology should be encouraged,so that the artificial intelligence industry can form a virtuous circle from research and development to application.On the other hand,encouraging active enhancement of the hard and soft power that matches the development of artificial intelligence technology seems important,including further promoting the construction of new infrastructure,improving the integrity of the supply chain,increasing talent and technical reserve to ensure that relevant factors and supply chain match the development of artificial intelligence.Meanwhile,measures like actively providing job guidance and job training to help the workforce acquire skills complementary to AI technology,reducing the gap between the rich and the poor so that more people can benefit from the popularization of AI should be taken.What’s more,attention should also be paid to the rational allocation of artificial intelligence at the industry level and the regional level to form a "national game of chess".