Abstract
Why do frontier technologies like artificial intelligence (AI) diffuse unequally across geographies? While prior work attributes this trend to demand-side factors like complementary assets, we theorize that technology entrepreneurs' strategic choice to target hub markets creates search frictions for firms outside of those markets, contributing to lower technology adoption. We test this supply-side framework using novel data tracking the adoption of standardized AI tools—which require few complementary assets and have flexible use cases—across approximately 88,000 firms worldwide from 2012 to 2023. Consistent with our theory, firms based in geographic markets that are less targeted by AI entrepreneurs are 12 percent less likely to adopt AI tools, even when targeting similar customers and observing no weaker of a relationship between AI adoption and subsequent performance. The findings highlight entrepreneurs’ market choices and the resulting search frictions as a mechanism driving global disparities in frontier technology adoption.