How do capital markets respond when firms in traditional industries integrate AI and advanced analytics (AIAA)? Having analysed stock market reactions to 397 announcements by biopharmaceutical firms between 2001 and 2020, Michael Freeman and his co-authors found that average returns following the integration are modest, at 0.58 percent.
But the average masks variations arising from firms’ characteristics and deal attributes. For instance, are the firms positioned to capture value or are they destroying wealth? Are they organisationally ready, as suggested by their R&D intensity and asset turnover? Are the investments focused on opportunity discovery or simply optimising current operations? The findings highlight the nuanced relationship between AIAA deals and market valuation.
SOURCE: INSEAD
Categories: Leadership in AI
The Future Leadership Institute 