Artificial Intelligence-enabled Customer Value Proposition Capability and Market Performance: The Moderating Role of Environmental Heterogeneity

Although artificial intelligence (AI) is becoming increasingly commonplace, many firms are still struggling to develop viable AI initiatives. Drawing on the dynamic capabilities theory (DCT), this paper proposes a new framework to explore the relationships among AI-enabled customer value proposition capability (AI-CVPC), two customer response capabilities (i.e., response speed and response expertise), environmental heterogeneity, and market performance. The results from 400 Chinese firms across various sectors reveal that response speed and response expertise are two key mediators that link the positive association between AI-CVPC and market performance. More interestingly, environmental heterogeneity enhances the mediating role of response expertise, rather than the mediating role of response speed. This paper contributes to the current AI-related business literature by developing a new moderated mediation model that explains the association between AI-CVPC and market performance. These findings also shed fresh light on the areas that firms should prioritize when developing their AI initiatives.