Influence of generative artificial intelligence on firm performance and mediating effect of dynamic capabilities

Abstract

The growing diffusion of Generative Artificial Intelligence (GenAI) is reshaping how organisations create value, learn, and compete in the digital economy. Despite increasing interest in the strategic potential of AI, the limited availability of empirical evidence constrains the mechanisms by which GenAI influences firm performance. Guided by the Resource-Based View (RBV), Dynamic Capabilities View (DCV), and Knowledge-Based View (KBV), this study examined the impact of GenAI on firm performance with focus on the role of Dynamic Capabilities (DC) to mediate. A quantitative approach guided the research survey in collecting data from 146 organisational respondents across multiple sectors. The findings from the statistical methods applied with the inclusion of mediation, regression and correlation analyses, revealed the existence of a significant positive correlation between GenAI and firm performance, demonstrating its strategic value as a performance-enhancing resource. GenAI showed a significant relationship with DC, confirming that firms adopting GenAI develop superior capabilities to sense, seize and reconfigure. DC exerted a robust positive effect on firm performance. Mediation analysis confirmed that DC fully mediated the association between GenAI and firm performance, highlighting that the benefits of GenAI are realised primarily through capability enhancement. The study contributes on DCV and RBV by highlighting that the value of AI-enabled resources arises from their integration within dynamic, knowledge-based routines rather than only possession of resources. The conceptualising GenAI as a knowledge-generation and recombination mechanism that fuels organisational learning and innovation contributes to the KBV. Recommends alignment of AI investments with capability-building initiatives, prioritising organisational learning infrastructures, and cultivating adaptive leadership and ethical AI governance. Concludes that GenAI drives firm performance through developing Dynamic Capabilities, reinforcing that sustainable competitiveness in the digital era depends on organisational strategic renewal and reconfiguration.