Artificial Intelligence and Digital Business Model Transformation: Entrepreneurial Orientation Mechanisms toward Business Model Innovation and Sustainable MSME Performance

Abstract

This study investigates the role of Artificial Intelligence (AI) adoption in fostering sustainable business performance among Micro, Small, and Medium Enterprises (MSMEs), while evaluating the serial mediating mechanisms of digital entrepreneurial orientation and digital business model innovation. Employing an explanatory quantitative design, empirical survey data were gathered from 250 owners and senior managers of digital platform-based MSMEs across North Sulawesi and Eastern Indonesia. Data analysis was executed using Partial Least Squares Structural Equation Modeling (PLS-SEM) via SmartPLS 4.0. Empirical findings demonstrate that: (1) AI adoption positively and significantly influences digital entrepreneurial orientation (β = 0.512; p < 0.001) and sustainable performance (β = 0.285; p < 0.001); (2) digital entrepreneurial orientation enhances digital business model innovation (β = 0.468; p < 0.001); (3) digital business model innovation significantly bolsters sustainable MSME performance (β = 0.442; p < 0.001); and (4) digital entrepreneurial orientation and digital business model innovation sequentially mediate the link between AI adoption and sustainable performance (indirect effect β = 0.106; p < 0.001; 95% CI [0.072; 0.145]). The structural model explains 64.2% of the variance in sustainable performance (R² = 0.642). These results advance the Dynamic Capability Theory and Resource-Based View by establishing that technological capability in AI must be paired with strategic entrepreneurial posture and business model reconfiguration to secure enduring resilience.