Artificial intelligence integration in franchise-based digital businesses: how to foster value co-creation

Purpose This study examines how artificial intelligence (AI) is integrated into franchise-based businesses in the digitalized entertainment sector. The aim is to offer a nuanced decision lens to guide managers in fostering value co-creation. Design/methodology/approach We adopted a qualitative multi-case study research, supported by sectoral analysis and conducted by gathering primary and secondary data. The study focused on four sub-sectors (film and television, music, sports and gaming) to strengthen solidity. Through NVivo [15], we employed an inductive approach to trace AI integration across dynamic capabilities. Findings The study reveals AI integration shifts franchises along a continuum from full value co-creation to full value co-destruction, with intermediate leaning states. Such effects impact dynamic capabilities, leading to augmentative or substitutive outcomes. This happens through two different processes: optimization achieved with non-intrusive AI integration; disruption determined by intrusive AI. Results identify common mechanisms adopted by multiple companies within the entertainment industry, leading to either outcome. Originality/value This research introduces a franchise-applicable “AI Integration–Dynamic Capability Alignment Framework” that enhances managerial decision-making. The study advances existing literature by classifying AI integration through contingency mechanisms. It enables managers to design and scale AI according to the superior outcome. Future research should apply the framework to other sectors and quantify performance effects.