AI-Enabled Decision Making and Competitive Advantage: A Knowledge-Based and Dynamic Capabilities Perspective

Abstract

This study examines how organizations create competitive advantage from AI-enabled decision-making capability by investigating the mediating roles of knowledge integration and dynamic capabilities within digital business ecosystems. Drawing on the Knowledge-Based View and Dynamic Capabilities Theory, the study explores the organizational mechanisms through which AI-enabled resources contribute to superior competitive outcomes. A quantitative cross-sectional survey was conducted among 426 managers and professionals working in organizations that actively utilize artificial intelligence technologies across North America. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. Reliability, validity, mediation, and predictive assessments were performed using a bootstrapping procedure with 5,000 resamples. The results indicate that AI-enabled decision-making capability is positively associated with knowledge integration and dynamic capabilities. Knowledge integration positively influences dynamic capabilities and competitive advantage, while dynamic capabilities emerge as the strongest predictor of competitive advantage. The findings further reveal that knowledge integration mediates the relationship between AI-enabled decision-making capability and dynamic capabilities, while dynamic capabilities mediate the relationship between knowledge integration and competitive advantage. This study contributes to the artificial intelligence and digital business ecosystem literature by integrating the Knowledge-Based View and Dynamic Capabilities Theory within a single explanatory framework. The findings demonstrate that AI-driven competitive advantage emerges through knowledge integration and capability development rather than through technology adoption alone, providing new insights into how organizations can transform AI investments into sustainable strategic value.