Artificial intelligence as a catalyst for leadership transformation and organizational performance in Tunisian SMEs

Abstract

The growing integration of artificial intelligence (AI) is reshaping leadership practices in small and medium sized enterprises, yet the mechanisms underlying this transformation remain insufficiently explored. This study examines how AI adoption contributes to leadership transformation through improvements in decision quality within SMEs. Drawing on transformational leadership theory and research on responsible AI governance, a conceptual model is tested using survey data collected from 302 leaders of Tunisian SMEs. The analysis employs Partial Least Squares Structural Equation Modeling, which is appropriate for assessing complex mediation and moderation effects. The findings indicate that more intensive AI use enhances decision quality, supporting the development of more participative and future oriented leadership practices. Transformational leadership is positively associated with employee engagement and organizational performance. Moreover, a responsible AI climate strengthens the relationship between AI adoption and leadership transformation, highlighting the importance of ethical and transparent AI governance in supporting sustainable leadership development outcomes globally. This study adopts a quantitative research design using data collected from 302 leaders of Tunisian SMEs through an online survey. Structural equation modeling (SEM) with the SmartPLS 4 software was applied to test the proposed conceptual model and hypotheses. The model examines the direct effects of AI use on decision quality, leadership transformation, and organizational performance, as well as the moderating role of a responsible AI climate. Reliability, validity and multicollinearity tests were conducted to ensure the robustness of the measurement and structural models. The results reveal that the use of AI significantly enhances decision quality and promotes transformational leadership among SME leaders. Decision quality partially mediates the relationship between AI use and leadership transformation. Transformational leadership, in turn, has a positive and significant impact on both employee engagement and organizational performance. Furthermore, the presence of a responsible AI climate strengthens the relationship between AI use and leadership transformation. These findings highlight the strategic and ethical importance of AI adoption in fostering effective and adaptive leadership within Tunisian SMEs. This study is limited to Tunisian SMEs, which may restrict the generalization of findings to other cultural or organizational contexts. The use of a cross-sectional design limits causal inference. Future studies could adopt longitudinal or comparative approaches to validate these results across industries and regions. Despite these limitations, the research provides strong empirical evidence on the role of AI in shaping leadership behaviors. It also opens new avenues for exploring how digital technologies and ethical climates jointly influence managerial practices and organizational development. The study provides actionable insights for SME leaders and policymakers in emerging economies. It emphasizes that integrating Artificial Intelligence (AI) into managerial processes enhances decision quality, promotes transformational leadership and strengthens employee engagement. Managers should focus on fostering a responsible AI climate that supports ethical use, transparency and trust. Training programs should develop leaders' digital and analytical skills to align technology with human values. These findings guide organizations in leveraging AI strategically to achieve sustainable performance and foster innovation-driven growth. This study highlights the social value of adopting AI responsibly within small and medium-sized enterprises. By fostering transparent and ethical AI practices, organizations can strengthen trust between leaders and employees, promote fairness in decision-making, and enhance overall workplace well-being. Responsible AI leadership also contributes to reducing resistance to technological change and encourages inclusive participation in digital transformation. Ultimately, the findings underline that ethical and human-centered AI adoption not only drives organizational performance but also supports broader social sustainability and responsible innovation in the digital economy. This study offers an original contribution by integrating technological, behavioral and ethical dimensions to explain how AI drives leadership transformation and organizational performance in SMEs. It extends transformational leadership theory by introducing decision quality as a key mechanism and a responsible AI climate as a moderating factor. Empirical evidence from Tunisian SMEs provides new insights into how AI adoption fosters ethical, data-driven, and adaptive leadership practices. The research adds value to both scholars and practitioners seeking to align digital innovation with sustainable and human-centered management.