AI Capabilities, Social Innovation, And Financial Performance in Malaysian Small and Medium Enterprises: A Dynamic Capabilities Perspective
List of Authors
Abdelhak Senadjki, Mohammed M I Alnajjar, Samuel Ogbeibu
Keyword
AI capabilities; social innovation; financial performance; SMEs; dynamic capabilities
Abstract
This study examines how Artificial Intelligence (AI) capabilities influence financial performance through social innovation as a mediating mechanism in Malaysian Small and Medium Enterprises (SMEs). Drawing on data from 250 SMEs collected through judgmental sampling, the research investigates three key dimensions of AI capabilities: management capabilities (AIMC), personal expertise (AIPE), and infrastructure flexibility (AIIF). Using Structural Equation Modeling with Partial Least Squares (PLS-SEM), the study reveals that AI capabilities positively impact social innovation, with infrastructure flexibility showing the strongest effect (β = 0.381, p < 0.05), followed by personal expertise (β = 0.260, p < 0.05) and management capabilities (β = 0.146, p < 0.05). AI capabilities also demonstrate direct positive effects on financial performance, with AIIF having the most substantial impact (β = 0.207, p < 0.05). However, contrary to theoretical predictions, social innovation shows no significant mediating effect between AI capabilities and financial performance (β = 0.016, p > 0.05). These findings contribute to understanding the complex relationship between AI adoption and SMEs outcomes in emerging economies, suggesting that whilst AI capabilities can drive both social innovation and financial performance independently, the pathway from social innovation to financial performance requires additional supportive mechanisms.