Capital Incentives May Be Slowing the Adoption of Cloud, Big Data, and AI

Featured in World Bank Blogs. Research by DeStefano on Capital Incentives Featured by World Bank.

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A recent paper featured in the World Bank Blogs, co-authored by Timothy DeStefano, associate research professor at Georgetown’s McDonough School of Business and senior policy scholar with the Center for Business and Public Policy (CBPP), finds that traditional investment incentives designed to encourage firms to purchase IT hardware may be unintentionally slowing the diffusion of cloud computing, big data, and artificial intelligence (AI).

The research, based on evidence from the United Kingdom’s Annual Investment Allowance shows that while firms receiving the incentive invested more heavily in hardware, they were significantly less likely to adopt cloud services, big data, and AI. On average, cloud adoption was delayed by more than a year, with smaller firms most affected. The study also documents labor market impacts, including reduced demand and lower wages for data analysts.

The authors argue that policymakers should revisit the design of capital incentives to better reflect the realities of the modern digital economy, ensuring that service-based technologies are not disadvantaged relative to owned hardware.

Read the full article on the World Bank Blogs here.