Overall, the evidence indicates that while large businesses have been leading in AI adoption, very small businesses have also had relatively high AI use rates during much of 2023 and 2024.
Source: U.S. Census Bureau
December 3, 2024
Written by: Emin Dinlersoz and Nathan Goldschlag
Recent research shows that advanced technology adoption and use are concentrated in large firms (Zolas et al., 2020; Dinlersoz and Wolf, 2023; Acemoglu et al., 2022; McElheran et al., 2024; and Bonney et al., 2024). This pattern also applies to artificial intelligence (AI). Evidence from the U.S. Census Bureau’s Annual Business Survey for the years 2017 and 2018 indicates that AI use in producing goods and services rises with firm size (Zolas et al., 2020 and Acemoglu et al., 2022). However, this pattern may be changing in the wake of recent advances in generative AI, which may have a disproportionate impact on small firms’ adoption and use of AI.1
Some researchers argue that generative AI can in theory help close the technology and performance gap between small and large firms (e.g., Acar and Gvirtz, 2024). It can enable employees in small firms to take on tasks that otherwise require additional specialized workers or outsourcing, both of which are costly. For instance, tasks such as marketing, designing websites, creating product descriptions, images and videos, gaining customer insight, and interacting with customers can be performed with the help of generative AI. While generative AI may not necessarily level the playing field between small and large firms, it can give some small businesses a competitive edge and boost their productivity, resulting in higher adoption of AI among small businesses. These potential benefits may also result from using other types of AI, not just generative AI.
Census Bureau survey data can help explore whether AI use is indeed accelerating among small businesses. Using high-frequency (biweekly) estimates of AI use rates by firm size class from the Business Trends and Outlook Survey (BTOS), we investigate trends in AI use since September 2023. The definition of AI in BTOS is broad and includes generative AI. Figure 1A shows estimated time trends in AI use rates by firm size class using bivariate Ordinary Least Squares (OLS) regressions that include a constant and linear time trend only, with the estimated rate of AI use in percentage terms on the y-axis. Each line represents a linear trend fitted to 26 biweekly observed estimates of AI use rates, covering the period from September 2023 to August 2024. The estimated trends abstract from period-to-period variation in observed use rates, allowing us to focus on changes over a longer horizon. The slope coefficients, shown as β in the figure, indicate the estimated rate of increase in the use rate every two weeks in terms of percentage points (pp). The standard error of the estimated slope coefficient is provided alongside each trend estimate.
Several patterns stand out in Figure 1A. The largest size class (250+ employees) exhibits the highest use rate, rising from 5.2% to 7.8% over time, with the highest rate of increase in use: 0.11 pp every two weeks. The smallest size class (1-4 employees) has the second-highest use rate that increased from 4.6% to 5.8% — a more moderate rate of increase over time (0.05 pp every two weeks).2 The third-highest use rate occurs in the size class of 100-249 employees, with a rate of increase nearly double that of the smallest class (0.09 pp every two weeks). The remaining “medium” size classes (5-9, 10-19, 20-49 and 50-99 employees) tend to have lower use rates in the range of 3-4%. The estimated rates of increase in use for these size classes are overall similar to that of the smallest size class, roughly 0.04 to 0.05 pp every two weeks. These patterns suggest that, since the early Fall of 2023, the smallest firms had a relatively high AI use rate, although the rate of increase was lower than for larger firms and more comparable to medium-size firms. If these trends persist, it will take another six years to reach a 25% adoption rate for the largest size class (250+ employees) and about 15 years for the smallest size class (1-4 employees).
The BTOS also asks firms about their expectations of AI use at any point in the next six months. Figure 1B shows trends for the expected AI use rates by size class, similar to Figure 1A. The patterns are somewhat different from the current use rates in Figure 1A. Firms in all size classes have higher expected use rates compared to the current use rates in Figure 1A. The largest size class has the highest expected use rate, with a relatively high rate of increase in the expected use rate over time (0.11 pp every two weeks). This is followed by the category of 100-249 employees, which has a rate of increase in the expected use rate equal to 0.08 pp every two weeks. The smallest size class also has high expected AI use rates relative to the medium classes but not compared to the two largest classes. The rate of increase in the expected use rate for the smallest size class is also low compared to the largest size classes, more in the range of the rates of increase for the medium size classes (0.03-0.05 pp every two weeks).
Overall, the evidence indicates that while large businesses have been leading in AI adoption, very small businesses have also had relatively high AI use rates during much of 2023 and 2024, and this trend is likely to continue into the near future. Advances in AI could have significant impacts on businesses, especially small firms, where AI can perform an increasing range of tasks that would otherwise require additional workers or outsourcing. Though we find differential patterns between firms of different sizes, adoption also varies significantly by other firm characteristics such as age and industry (Acemoglu et al., 2022). The ongoing high-frequency and timely collection of data on the BTOS will continue to yield valuable insights into various aspects of AI use by businesses and the impact of AI on businesses and workers.
1 Generative AI is a type of AI that uses prompts or other inputs to create text, images, music, videos or code.
2 Pairwise comparisons between the estimated rates of increase for any two size classes were not tested for statistical significance.
Figures 1A. and 1B. Trends in Current and Expected AI Use Rates by Firm Size Class
A. Current use rates
B. Expected use rates
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