AI transformation, resource reallocation, and corporate capacity utilization

Artificial intelligence (AI) is reshaping the global economic landscape, prompting China to initiate a new wave of AI application pilot programs. Using the AI Application Pilot Zones policy as a quasi-natural experiment, this study examines the impact of an AI-driven transformation on corporate capacity utilization rates and its underlying mechanisms. Based on 44,537 firm-year observations from publicly listed Chinese companies between 2007 and 2023, and employing two-way fixed effects (TWFE) and staggered difference-in-differences (DID) methodologies, we find that the AI policy did not enhance corporate capacity utilization. On average, this led to a 0.516 percentage point decline. This negative effect is particularly pronounced for firms with longer operational histories, higher asset specificity, and greater market concentration. Mechanistic analysis revealed that short-term impacts operate through resource reallocation and demand shock effects. This study further discusses other unintended consequences of the policy, offering insights for refining AI-related policies to promote broader AI adoption.