IMPACT OF ARTIFICIAL INTELLIGENCE ADOPTION ON SME PERFORMANCE: THE MEDIATING ROLE OF INNOVATION CAPABILITY AND THE MODERATING ROLE OF LEADERSHIP STYLE

Abstract

The artificial intelligence (AI) is starting to be viewed as a strategic asset that can be used to increase competitiveness, flexibility, and efficiency of small and medium-sized enterprises (SMEs). However, regardless of the increasing interest in AI, the adoption results in terms of performance are still uneven amongst SMEs. Such companies claim higher productivity, a better customer focus, and returns on innovations, and some of them struggle to find the connection between AI investments and organizational value. This difference implies that the use of AI does not have a direct effect on SME performance. Rather, the outcomes of AI can be clarified by the internal ability of the company to internalize and rearrange and deploy technological resources, as well as the leaderly situations in which the adoption is going to occur. The following paper discusses how the adoption of AI affects SME performance taking into account the mediating role of innovation capability and the moderating role of the leadership style. The paper also advances a conceptual argument on the qualitative research perspective that argues that the multiple-case qualitative study design is appropriate to study the mediating effect of organizational results of SME participants experience the adoption of AI and the effect of such experiences on their behavior have. The article claims that innovation capacity mediates AI-performance relationship since companies have to convert AI inputs into process betterment, learning practices, service restructuring and new value co-creation. The leadership style can moderate this process as leaders can influence the confidence of employees, their strategic orientation, risk-taking and adaptability. The positive contribution of AI implementation to the innovation capability should be supported by the transformational and participative forms of leadership, and restricted by the rigid and authoritative ones. The paper helps fill the gap in SME and digital transformation literature by introducing the concept of AI adoption as both a socio-technical and capability-based process instead of a technological intervention. It equally gives valuable implications to whoever owns SMEs, managers and policy makers with the focus on the fact that successful AI implementation goes beyond the capacity to spend money on digital tools. It requires a management that encourages learning and an organizational culture which encourages capacity of innovation.