The Influence of Artificial Intelligence on Dynamic Capabilities and SMEs Performance

Abstract

This study aims to examine the effect of Artificial Intelligence (AI) on dynamic capabilities and performance of Small and Medium Enterprises (SMEs) establishing evidence from Indonesia. Adoption of AI can enable SMEs to increase their operational efficiency and innovation process as compared to resource constraints and infrastructure. Through quantitative approach, this research examines how AI capabilities human expertise, technological resources and strategic alignment enables both AI adoption and enhances dynamic capabilities. The results show that AI capabilities have a significant and positive effect on AI adoption, which ultimately enhances dynamic capabilities and SME performance. The impact of the study is twofold, as it provides valuable theoretical contributions to entrepreneurs and policymakers on how SMBs in developing countries can leverage AI into their digital transformation trajectories for growth and competitiveness.