Artificial Intelligence Adoption, Dynamic Capabilities, and Firm Risk‐Taking

ABSTRACT The paper studies how firms can leverage AI to enhance risk‐taking. Using a sample of 30,725 firm‐year observations from Chinese listed companies (2011‐2021), this study shows that AI adoption significantly increases risk‐taking. Regarding the mechanism, AI strengthens dynamic capabilities by improving absorptive, adaptive, and innovative capabilities, which in turn promote greater risk‐taking. Heterogeneity analysis shows that the positive effect of AI on risk‐taking is more pronounced among firms with low ESG performance, firms in low‐technology industries, and firms located in less marketised regions. Furthermore, AI adoption contributes to improved new‐quality productivity partly through enhanced risk‐taking. These findings extend theoretical understanding of how AI influences firm‐level strategic behavior and provide practical insights for firms seeking to optimize risk decision‐making and enhance competitiveness.