Artificial Intelligence in Supporting Strategic Decision-Making and Its Impact on Organizational Performance

Abstract

AI capability is a new strategic capability in the organization that goes beyond operational efficiency and can support the quality strategic decision-making, sustainable performance of an organization, and high decision quality. Though AI capability is evolving, current research remains disparate in how to transform an AI capability to a organizational value with the role of governance, leadership, and organizations capability. To solve this, in this study, a integrated conceptual framework grounded in the theory of resource-based view(RBV), dynamic capabilities theory(DCT) and the AI Governance literature is developed and empirically tested. In the model, the sequential relation between AI capability, AI governance, strategic decision quality, organizational agility, and organizational performance was proposed and the moderating role of digital leadership was examined. An explanatory sequential mixed-methods research design was used. The empirical analysis includes two phases. In the first phase, a cross-sectional survey of 446 senior executives and strategic decision makers of public and private organizations was conducted to empirically test the proposed integrated model using Partial Least Squares Structural Equation Modeling (PLS-SEM). In the second phase, qualitative data from 30 semi-structured interviews with senior executives was collected to gain a deep understanding of AI governance, digital leadership and organizational agility practices. Multi-group analysis further revealed differences in the proposed relationships for public and private organizations. Findings revealed that AI capability not only significantly strengthens the AI governance, and consequently the strategic decision quality, but it also improve the organizational agility, resulting in improved performance. Furthermore, digital leadership has a positive effect on reinforcing the association between AI governance and the strategic decision quality. Overall, this study integrates the technology capability, the organizational capability and the leadership capability to establish an AI-enabled strategic decision-making and performance management framework, and provides strategic insights for organizations that aim to realize greater value from their AI investments.