AI Orientation and Innovation Ambidexterity: Role of Dynamic Capabilities and Environmental Dynamism

This study investigates how artificial intelligence (AI) orientation influences radical and incremental innovation and examines the underlying mechanisms. Using data from Chinese listed firms from 2008 to 2022, we find that AI orientation promotes radical innovation more effectively than incremental innovation. Drawing on dynamic capability theory, the study indicates that firms’ sensing, seizing, and transforming capabilities strengthen the impact of AI orientation on radical innovation while weakening its effect on incremental innovation. Additionally, our analysis shows that the effectiveness of AI orientation varies across environmental conditions. In environments with high market and technology uncertainty, AI orientation enhances incremental innovation rather than radical innovation. In highly competitive settings, AI orientation facilitates both types of innovation. These findings advance our understanding of the nuanced role of AI orientation in innovation while offering practical insights for firms seeking to leverage AI for different innovation objectives.