Data-Driven Entrepreneurial Decision Ecosystem Using Artificial Intelligence for Improving Innovation and Competitive Advantage in Small and Medium Enterprises

Abstract

Artificial Intelligence (AI) is becoming increasingly relevant and promises a variety of benefits for organizational productivity, innovation, and the decision-making of managers. The more accessible the AI becomes, however, the more challenging it becomes for some Small and Medium Enterprises (SMEs) to deploy it for entrepreneurial support. The study attempts to explore the impact of moving towards AI on entrepreneurial decision-making and its subsequent impact on operating performance, innovative performance, competitive advantage, and SME performance. This study was based on a quantitative explanatory research design, in which data were collected through a survey from 350 owners/managers of manufacturing, retail, and service SMEs. Data were collected using a structured questionnaire based on a five-point Likert scale, and data were analyzed using the Partial Least-Squares Structural Equation Modeling (PLS-SEM) for evaluating the relationships between hypothesized constructs and testing the hypotheses of the study. The result indicates that the incorporation of AI tools into entrepreneurial decision-making enhances entrepreneurial capabilities (β= 0.723; Ƥ <0.001) and efficiency (β= 0.697; Ƥ <0.001). The entrepreneurial decision-making impacted the innovation performance positively with (β=0.781; Ƥ < 0.001) while operational efficiency has a significant influence on competitive advantage (β= 0.754; Ƥ <0.001). The mediating role of entrepreneurial decision-making in the relationship between AI integration and SME performance is significant (β= 0.412, Ƥ <0.001). The overall R2 of the structural model is 0.667, indicating that it is an excellent level of explanatory power. Predictive analytics and business intelligence systems are the types of AI systems most frequently employed by the studied SMEs (78.3% and 74.6%, respectively). In summary, the findings of this study emphasize that AI is a useful and powerful strategic tool for improving the quality of entrepreneurial decisions, enhancing operational efficiency and innovation performance, increasing competitive advantages, and consequently promoting business success. The results of this study should guide SME owners, policymakers, and industry players to accelerate the digitization processes and sustainable business development through the successful adoption of AI.