AI-Driven Business Model Innovation and Sustainable Venture Performance in Emerging Markets: The Mediating Role of Dynamic Capabilities and the Moderating Effect of Digital Leadership

Abstract

While AI is transforming the value-creating process of firms, little and fragmented evidence exists on how AI-based business model innovation (AI-BMI) affects the sustainable performance of the venture in emerging markets. Based on the dynamic capabilities view and the upper-echelons-informed view on digital leadership, this study builds and tests a moderated mediation model that reveals how AI-BMI contributes to sustainable venture performance (economic, social, and environmental) through dynamic capabilities (sensing-seizing-transforming) and how digital leadership moderates the relationship between AI-BMI and dynamic capabilities. The study aims to test six hypotheses in an emerging economy using a cross sectional survey design with partial least squares structural equation modeling (PLS-SEM). The illustrative results show that AI-BMI has a positive direct relationship with the sustainable venture performance, the relation is partially mediated through the dynamic capabilities and the magnitude of the indirect relation is greater with high levels of digital leadership. The study builds on the business model innovation and digital transformation literature by clarifying the 'how' and 'when' of driving triple bottom line outcomes with AI-driven model redesign, and provides actionable tips for founders, investors, and policy-makers.