THE STRATEGIC IMPACT OF ARTIFICIAL INTELLIGENCE ON BUSINESS INNOVATION AND FIRM PERFORMANCE: A RESOURCE-BASED VIEW APPROACH

Abstract

Purpose: This study explores how Artificial Intelligence (AI) improves firm performance by encouraging innovation in business models using the (RBV) theory. It examines how AI adoption boosts firm outcomes, with (BMI) acting as a bridge, and how IT strategy and data privacy concerns influence (moderate) this relationship.

Design/methodology/approach: Information was obtained from 314 managers employed in both Islamic and conventional banks in Punjab, Pakistan. A technique called (PLS- SEM) was used to analyze the data.

Results: The findings indicate that AI enables firms to improve by transforming the way they conduct their business (via innovation). This effect improves even when there is a good IT strategy. Nevertheless, in the case of fear of data protection and privacy, the effectiveness of AI can be lower.

Practical Implications: Businesses are advised to treat AI as an important strategic resource in innovation and to earn a competitive advantage. AI requires effective IT strategies and optimal use of data so that companies can obtain the best results. Policymakers should also address privacy risks.

Originality/Value: This study contributes to existing knowledge by demonstrating how AI enhances business performance through innovation, underpinned by RBV theory. This study presents a new model that elucidates the indirect and conditional impacts of AI on the modern digital business landscape.

Keywords: Artificial intelligence, Business model innovation, Firm performance, IT strategy, and safety & Privacy.