The impact of AI adoption on organizational performance: ethical and technological factors in Iran’s startup ecosystem

Purpose This study investigates the complex interplay between technological and ethical factors influencing artificial intelligence (AI) adoption in entrepreneurship and startup ecosystems, with a particular focus on how these dynamics impact innovation outcomes and organizational performance. Design/methodology/approach Employing a comprehensive analytical framework, the research examines quantitative data to assess the relationships among technology related factors (such as interactivity, relative advantage, and perceived intelligence), ethical principles (including fairness, accountability, transparency, accuracy, and autonomy), ethical dilemma, and their collective influence on AI adoption and exploitative innovation within entrepreneurial contexts. Data was collected using a self-administrated questionnaire to 207 respondents, in the Iran entrepreneurship and startup ecosystem. The Partial Least Square-Structural Equation Modeling (PLS-SEM) technique was used to examine the proposed hypotheses of the study. Findings The findings reveal that technology related factors specifically interactivity, relative advantage, perceived intelligence, transparency, and accuracy significantly drive AI adoption among entrepreneurs. In contrast, ethical considerations such as fairness, accountability, and autonomy do not exhibit a direct influence on adoption decisions. Also, the moderating relationship of ethical dilemma between exploitative innovation and organizational performance by AI adaptation was rejected. Notably, the study highlights the pivotal mediating role of exploitative innovation, AI adoption enhances exploitative innovation, which in turn improves organizational performance; however, there is no direct relationship between AI adoption and organizational performance. Practical implications Entrepreneurs and startup leaders should prioritize AI technologies that offer clear interactive capabilities, relative advantages, and transparent, accurate operations to maximize adoption and performance benefits. While ethical principles remain important, their influence may be more pronounced at later stages of implementation or in highly regulated sectors. Policymakers and ecosystem builders are encouraged to focus on fostering environments that support the practical integration of AI, particularly in ways that enhance exploitative innovation and organizational scalability. Originality/value This research provides novel insights by disentangling the relative importance of technological versus ethical factors in AI adoption within entrepreneurial settings. It advances the literature by empirically demonstrating the limited direct impact of certain ethical considerations on adoption decisions and by highlighting the central role of exploitative innovation as a mediator between AI implementation and organizational outcomes.