AI integration in service delivery: enhancing business and sustainability performance amid challenges

Purpose This study aims to investigate how artificial intelligence (AI) integration in service delivery influences sustainability and business performance in small- and medium-sized enterprises (SMEs) across diverse sectors. It further examines the moderating roles of stakeholder engagement and adoption barriers and the mediating role of sustainability performance in the AI–business performance relationship. Design/methodology/approach A mixed-methods approach was used, combining survey data from 428 firms across four sectors with qualitative insights from 20 semistructured interviews. Partial least squares structural equation modeling tested the hypothesized relationships, while thematic analysis provided contextual understanding of implementation challenges and success factors. Findings AI integration significantly improves both sustainability and business performance. Stakeholder engagement strengthens the positive effect of AI on sustainability outcomes, while adoption barriers weaken AI’s impact on business performance. Sustainability partially mediates the relationship between AI integration and business outcomes, underscoring its strategic role. Practical implications To maximize AI’s value, SMEs should adopt phased strategies, engage stakeholders proactively and address technological and organizational barriers. These actions enhance AI’s effectiveness in driving sustainable, competitive service delivery. Originality/value This study advances the AI literature by linking AI adoption to dual sustainability and business benefits while also incorporating the moderating effects of engagement and barriers – an area previously underexplored. It offers a sector-sensitive, empirically grounded model of AI-enabled transformation in SMEs.