AI CAPABILITY AND FIRM PERFORMANCE: A DYNAMIC CAPABILITIES PERSPECTIVE ON DECISION-MAKING QUALITY

Authors

  • Mr. Lovekesh Singh Assistant Professor, Manipal Academy of Higher Education (BFSI) Bangalore
  • Dr. Nihar Ranjan Agasti Asst. Professor (HR & OB), Medicaps University, Indore
  • Dr. Thiruppathi KTM Faculty, School of Maritime Management, Indian Maritime University, Chennai Campus
  • Dr. Sovik Mukherjee Assistant Professor in Economics, St. Xavier's University, Kolkata
  • Ms. Saranya P K Research scholar, Rathinam College of Arts and Science, Coimbatore

DOI:

https://doi.org/10.69980/1mwwk134

Keywords:

Performance, capability, technologies, businesses strive, Dynamic, capabilities

Abstract

In today's agile business landscape, Artificial Intelligence (AI) has emerged as a key strategic asset for companies looking to optimize business performance. Although AI investments have been increasing, not much research has focused on how AI capability can affect firm performance. Based on the Dynamic Capabilities Perspective (DCP), the present study examines the connection between the AI capability, decision-making quality, and firm performance. The study also explores the mediating effect of decision making quality between AI capability and firm performance. The design of the research used was quantitative and the respondents were 245 people who belong to organizations that are implementing technologies powered by AI. Measurement scales from previous studies were adapted to quantify the aspects of AI capability, quality of decision-making, and firm performance. Data collected were analyzed by using the software ADANCO, namely by Partial Least Squares Structural Equation Modeling (PLS-SEM). The results confirmed that the capability of AI has a positive and significant impact on decision-making quality and firm performance. The quality of the decisions also proved to impact firm performance positively. The mediation analysis verified the presence of a partial mediation between AI capability and firm performance. The study helps the existing literature by elucidating the mechanism of generating organizational value through the use of AI capability and the enhancement of managerial decision making processes. The results also offer implications for organizations looking to enhance their strategic responsiveness and competitive edge with AI-driven decision systems. AI's capabilities are opening up exciting new areas for growth in the business world, with the ability to enhance the effectiveness of decision-making and the performance of the firm.AI capabilities are increasingly a viable option for businesses in several sectors as they can improve the decision-making process and boost business performance.

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Published

2026-05-23

Issue

Vol. 12 No. 2s (2026): FinTech, Digital Banking, and Financial Inclusion in Emerging Markets (ISSN: 2208-2190) (In-Press)

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Articles

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