Moderating role of artificial intelligence in the impact of digital transformation and innovation on small and medium-sized enterprises’ financial performance

Abstract

Objective: The objective of the article is to identify the moderating role of artificial intelligence (AI) in the relationship between digital transformation, innovation, and financial performance within small and medium-sized enterprises (SMEs). We aimed to investigate how AI amplifies the impacts of digital transformation and innovation on financial performance indicators, including profit, revenue, and return on assets (ROA), particularly in the context of an emerging economy. Research Design & Methods: We adopted a quantitative research approach, utilising data collected through structured questionnaires from 246 SMEs in Vietnam. We used correlation analysis and ordinary least squares (OLS) regression to test the proposed hypotheses. Findings: The results demonstrate significant positive impact of digital transformation and innovation on SMEs’ financial performance, notably in revenue and profit. Importantly, AI adoption substantially enhances these positive effects, indicating its critical role as a moderating factor. SMEs integrating AI alongside digital transformation and innovative practices achieve better financial performance. Implications & Recommendations: The study offers valuable evidence for SME managers and policymakers on promoting AI to maximise returns from digital and innovative investments, particularly in emerging markets where such empirical evidence is limited. Contribution & Value Added: This study advances the literature by theorising and testing AI as a moderating strategic capability rather than a standalone performance predictor. Anchoring on the resource-based view (RBV), the study explains how AI complements digital transformation and innovation, amplifying their effects on SMEs’ financial performance.