AI Adoption, Digital Capability, and Innovation Capability: The Mediating Role of Strategic Decision-Making Quality

This study proposes that AI Adoption and Digital Capability significantly influence Innovation Capability, both directly and indirectly through the mediating role of Strategic Decision-Making Quality. The data collected from 342 respondents, consisting of business owners and office workers, were analyzed using the Partial Least Squares Structural Equation Modeling (PLS-SEM) approach. The findings indicate that AI Adoption and Digital Capability have positive and significant effects on Strategic Decision-Making Quality, which in turn has a strong positive impact on Innovation Capability. Notably, Strategic Decision-Making Quality demonstrates the strongest influence on Innovation Capability (β = 0.718, p < 0.001), highlighting its critical role as a mediator. Furthermore, both AI Adoption and Digital Capability also show significant direct effects on Innovation Capability, although their indirect effects through Strategic Decision-Making Quality further strengthen this relationship. These results suggest that while technological adoption and digital skills are essential enablers, their effectiveness in driving innovation largely depends on how well individuals utilize them in making strategic decisions. The data were gathered through an online questionnaire distributed via Google Forms using a Likert scale (1–5), ensuring measurable and structured responses. Overall, the findings imply that organizations should not only invest in AI technologies and digital capabilities but also enhance the quality of strategic decision-making processes to fully leverage innovation potential.