The Impact of AI Adoption on Innovation Performance and Operational Efficiency in Indonesian Small Businesses

This study investigates how Artificial Intelligence (AI) adoption influences innovation performance and operational efficiency in Indonesian small and medium-sized enterprises (SMEs). Despite the increasing role of AI in enhancing business outcomes, existing research predominantly focuses on large firms, leaving a gap in understanding its impact on SMEs, particularly in emerging markets. Grounded in the Technology-Organization- Environment (TOE) framework, Diffusion of Innovation (DOI), and Resource-Based View (RBV), this study explores both the direct effects of AI adoption and the moderating role of technological investment intensity. Data were collected from 105 SMEs and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results show that AI adoption significantly improves both innovation performance and operational efficiency. Additionally, technological investment intensity positively moderates these relationships, while firm size, business age, and industry type do not show significant effects. These findings highlight the strategic importance of AI and technological readiness for SMEs aiming to enhance performance in a competitive digital environment.