How AI Impacts Companies’ Dynamic Capabilities

Artificial intelligence (AI) is rapidly transforming the business landscape, but limited research is available regarding how companies are responding and adapting to AI. Using dynamic capability theory, we hypothesized that companies would develop new dynamic capabilities to seize AI opportunities. Our analysis of qualitative data from six major Chinese construction companies revealed that these companies’ existing dynamic capabilities are key to adopting and adapting AI technology for business model innovation. We developed a dynamic capability model that describes how companies use their existing dynamic capabilities for sensing AI, seizing AI, and transforming to leverage AI for business model innovation. Our research bridges the gap in understanding the relationship between AI adoption, existing dynamic capabilities, and AI adaptation. Integrating AI is not as daunting as it may seem. Companies, practitioners, and other stakeholders can transition into AI, starting with their existing capabilities.