Bridging the AI Readiness–Capability Gap: Manufacturing SME Transformation in the GCC

Abstract

Manufacturing small and medium-sized enterprises (SMEs) are central to economic diversification, industrial development, and employment creation across Gulf Cooperation Council (GCC) countries, particularly the United Arab Emirates (UAE). At the same time, these firms face persistent constraints related to finance, digital infrastructure, skills, managerial capability, data readiness, and organizational resistance, which may limit their ability to realize value from artificial intelligence (AI). This review examines how manufacturing SMEs can move beyond AI adoption toward the development of organizational AI capabilities. Drawing on the literature, AI capability is discussed through three dimensions: AI infrastructure capability, AI business-spanning capability, and proactive AI stance. The review synthesizes the opportunities, challenges, and policy implications associated with these capabilities in the GCC and UAE contexts. It further proposes a future research agenda emphasizing capability development, strategic alignment, experimentation, responsible AI governance, and ecosystem support. The review contributes by positioning AI capability building as a key requirement for sustainable SME competitiveness and industrial transformation.