AI tool adoption as a driver of digital business model innovation and retail firm performance

Purpose The adoption of artificial intelligence (AI) tools in the retail industry enhances business efficiency and improves customer service. However, the existing literature lacks a comprehensive framework that captures how AI tools are driving digital transformation, digital business model innovation (DBMI) and organizational performance. Therefore, this study examines the role of AI tools in digital transformation and DBMI in shaping retail performance. Design/methodology/approach This research is quantitative, and a self-administered questionnaire was utilized to collect data from 350 retail managers in China. Partial least squares-structural equation modeling (PLS-SEM) was used for data analysis. Findings The study's findings indicate that AI tools significantly influence the exploitative digital transformation and exploratory digital transformation. The findings also confirm the positive influence of exploitative and exploratory digital transformation on DBMI that lead to market agility, organizational agility and organizational performance. The findings also show the moderating effect of innovation capability on relationship between exploratory digital transformation and DBMI. Originality/value This study examines the role of AI-driven digital transformation in DBMI, which is crucial for market and operational agility and organizational performance. Furthermore, this study offers fresh insight by incorporating innovation capabilities as a moderator, revealing that higher innovation capabilities strengthen the connection between digital transformation and DBMI.