Artificial Intelligence and Entrepreneurial Success: Exploring Innovation Capability and Digital Literacy as Dynamic Enablers of Performance

Abstract

This study examined the relationship between artificial intelligence (AI) adoption and entrepreneurial success, emphasising the mediating roles of innovation capability and digital literacy as dynamic enablers of performance. Using a mixed-methods design, data were collected from 310 entrepreneurs representing technology-driven and service-oriented enterprises in Pakistan, complemented by 20 in-depth interviews with startup founders. Quantitative data were analysed using structural equation modelling (SEM), and qualitative insights were derived through thematic analysis. Results indicated that AI adoption significantly enhanced entrepreneurial success, with this effect mediated by innovation capability and digital literacy. Entrepreneurs with higher digital literacy demonstrated greater adaptability in leveraging AI tools for innovation, strategic decision-making, and competitive advantage. The qualitative findings further revealed that AI-driven decision-making improved forecasting, resource allocation, and market responsiveness, while innovation capability fostered creative product development. However, the study also found that the benefits of AI adoption depended on the entrepreneur's digital competence and continuous learning capacity. The findings underscored the importance of integrating technological, cognitive, and organisational factors to ensure sustainable entrepreneurial performance. The study concluded that AI's true potential in entrepreneurship emerged not solely from automation but from the synergy of human ingenuity and innovation.