Governance-Specific Use of AI, Ownership Structure, Financing, and Operational Agility: Evidence from Indian SMEs

Abstract

BAs firms begin integrating AI into governance functions, research on how ownership structure and financing relate to this shift remains early-stage, especially among SMEs. To address this gap, this study draws on an unweighted analytical sample of 1215 Indian SMEs from the World Bank Enterprise Surveys India 2025 round linked to the 2026 AI Follow-up Survey. The follow-up sample overrepresents digitally intensive sectors, testing ten hypotheses via logistic regression and bootstrapped decomposition. The analysis showed that owner-managed firms were less likely to use AI for strategic decision-making (OR = 0.30, p < 0.001) yet more likely to hold a loan or credit line (OR = 2.16, p < 0.001) and score higher on operational agility (OR = 1.69, p < 0.001). Notably, general AI adoption was not associated with agility, whereas governance-specific use of AI and financing were strongly associated with operational agility (OR = 3.96–4.15 and OR = 4.20, p < 0.001), though no association was detected between them (p = 0.961); the indirect component was negative for strategic AI use, positive for financing, both under extended controls. Together, results indicate functional AI use, not adoption, is associated with agility, so binary adoption measures may inadequately evaluate SME digital transformation. The results describe associations within the observed analytical sample and should not be interpreted as nationally representative estimates.