Generative AI as an Entrepreneurial Dynamic Capability: Effects on Opportunity Recognition, Strategic Decision Quality, and Startup Performance in Saudi Arabia.

Abstract

Generative artificial intelligence (GenAI) is becoming part of everyday entrepreneurial work, but it is still unclear when its use actually improves a startup's ability to compete. This paper develops a capability-based explanation rather than assuming that adoption itself creates value. Drawing on Dynamic Capabilities Theory, the study examines whether strategic use of GenAI is associated with stronger opportunity recognition and better strategic decision quality, and whether these capabilities subsequently support innovation and startup performance. GenAI is treated as a digital resource, not as a dynamic capability in its own right. The empirical study is designed around founders, co-founders, chief executives and senior decision-makers in startups operating in Saudi Arabia. Data will be collected through a structured survey and analysed using partial least squares structural equation modelling (PLS-SEM). The proposed model connects GenAI use with the sensing, seizing and transforming logic of dynamic capabilities while keeping human entrepreneurial judgment at the centre of the explanation. In doing so, the study moves the discussion beyond the question of whether founders use GenAI and toward the more difficult question of how that use becomes an organizational capability. The Saudi setting provides an opportunity to examine this relationship in an entrepreneurial ecosystem where AI adoption and startup-support initiatives are developing at the same time.