Artificial intelligence technology innovation and firm productivity: Evidence from China

•Identifying AI patents at the firm level and using them as a measure of AI technology innovation.•AI technology innovations have a significant positive effect on business productivity.•A stronger impact on productivity for state-owned enterprises, large enterprises, and firms operating in labor-intensive industries.•Reducing costs, increasing the proportion of highly skilled labor, facilitating digital transformation and improving innovation efficiency are key mechanisms. This study empirically examines the influence of artificial intelligence (AI) technology innovation on productivity using a sample of Chinese-listed companies. The results underscore that AI technology innovations can significantly enhance firms' total factor productivity. Moreover, while this positive impact is generalizable across firms, it is more pronounced in large-size enterprises, state-owned enterprises, and labor-intensive industries. Additionally, the mechanisms analysis reveals that cost reduction, increased utilization of highly skilled labor inputs, facilitation of digital transformation, and improvement in innovation efficiency are mechanisms through which AI technology innovation enhances productivity.