Artificial Intelligence Adoption and Sustainable Business Performance: The Mediating Role of Innovation Capability

The rapid advancement of Artificial Intelligence (AI) technologies has transformed the way organizations operate, innovate, and create value in an increasingly competitive business environment. AI adoption enables firms to automate processes, enhance decision-making, improve operational efficiency, and deliver personalized customer experiences. However, the extent to which AI contributes to sustainable business performance depends not only on technological implementation but also on an organization's ability to innovate. This study examines the relationship between Artificial Intelligence adoption and sustainable business performance, with innovation capability serving as a mediating variable. Specifically, it investigates how AI adoption enhances organizational innovation capability and, in turn, improves economic, environmental, and social dimensions of business performance. The study adopts a quantitative research approach using structured questionnaires administered to managers and professionals from manufacturing and service organizations. Data will be analyzed using Structural Equation Modeling (SEM) to examine the direct and indirect relationships among the study variables. The proposed conceptual framework posits that AI adoption positively influences innovation capability, which subsequently enhances sustainable business performance. The findings are expected to provide empirical evidence on the strategic role of AI in fostering innovation and achieving long-term organizational sustainability. Furthermore, the study offers practical implications for business leaders, policymakers, and practitioners by highlighting the importance of integrating AI technologies with innovation-driven strategies to improve competitiveness and sustainable growth. By linking digital transformation with sustainability outcomes, this research contributes to the growing body of knowledge on AI-enabled business innovation and supports the achievement of the United Nations Sustainable Development Goals, particularly SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation and Infrastructure), and SDG 12 (Responsible Consumption and Production).