摘要：

This study examines whether and how innovations affect firms' market power measured by markups. Based on a panel dataset of electronics firms in Taiwan and using patents as the indicator of innovations, empirical estimations show that patents positively influence markups overall. Notably, separating patents into artificial intelligence (AI) and other patents, we find a significant difference in markup enhancement effects between them. AI patents generate a large markup effect than that of non-AI patent, suggesting that AI technologies, which are new general-purpose technologies, do have a distinct effect on enhancing firms' market power compared to other innovations. AI and non-AI patents exhibit a strong complementary effect on facilitating markups. Robustness checks confirm these findings. The mediating mechanism analyses show that high markup firms self-select to conduct innovations. Innovations, both AI and non-AI patents, help firms increasing sales and reducing costs, thereby raising markups.