AI Adoption Capabilities and Sustainable Competitive Advantage in Bangladeshi SMEs: The Mediating Role of Innovation Capability

Abstract

Purpose: The aim of this investigation is to explore the effect of AI Adoption Capabilities on Sustainable Competitive Advantage in Small and Medium-Sized Enterprises (SMEs) in Bangladesh. More specifically, the study concentrates on three AI-related capabilities, namely, AI Tool Adoption, Organizational AI Readiness and AI-Driven Decision Making. It also examines the mediating relationship between AI-related capabilities and Sustainable Competitive Advantage via Innovation Capability. Research type/design and methodology: A quantitative and survey research type is used. The data was gathered from the respondents from SMEs by applying a structured questionnaire, which was developed in a five-point Likert scale in Bangladesh. A total of 118 SME respondents who had completed the questionnaire were selected for a final usable sample. To evaluate the measure model, the structural model, direct effects and mediated effects, the obtained data were analysed with the technique of Partial Least Squares Structural Equation Modelling (PLS-SEM) using SmartPLS software. Results: Results revealed that AI-related capabilities are important for the enhancement of innovation capability in Bangladeshi SMEs. Organizational AI Readiness and AI Tool Adoption demonstrated a strong linkage with Innovation Capability as well as with innovation development. Results also demonstrate the strong positive relationship between Innovation Capability and Sustainable Competitive Advantage. This indicates that SMEs could enjoy long-term competitiveness when they can learn how to use AI resources to create new products, services, processes and business practices. Originality/value: This study makes an original contribution to the literature because it takes the perspective of AI adoption capabilities of Bangladeshi SMEs. It emphasises that mere use of AI does not necessarily guarantee industries' sustainable competitive advantage, but rather that industries' innovation capability is a significant mechanism fulfilling the competitive value of AI-related capabilities. The research further offers a practical understanding for SME owners/managers who desire to utilise AI tools in a better way for the innovation and long-term growth of their businesses.