Realizing the balance of economic and environmental performance through artificial intelligence capability

Purpose Many manufacturing firms hope to leverage artificial intelligence to achieve both economic and environmental performance. However, the pathways still remain unclear. Using dynamic capability theory as a theoretical lens, this study empirically investigates the impact of artificial intelligence capability (AIC) on the balance of economic and environmental performance. Meanwhile, this study explores the mediating roles of business model innovation and product innovation to open the black box behind the above relationship. Design/methodology/approach This research employs the partial least squares-structural equation modeling method to empirically test the proposed model using the cross-sectional survey data from 197 Chinese manufacturing firms. Findings First, the impact of AIC on the balance of economic and environmental performance is significantly positive. Second, product innovation positively mediates the above relationship, while the mediating role of business model innovation is not verified. Third, the sequential mediation model of “AIC→business model innovation→product innovation→the balance of economic and environmental performance” is proven. Originality/value This finding not only extends the literature by demonstrating the positive effect of AIC on the balance of economic and environmental performance, but also fills a gap that previous studies have ignored by discussing the unique mechanism of the above relationship from integrating both business model innovation and product innovation. It also provides theoretical guidance and insights for practitioners to facilitate the balance between economic and environmental performance by integrating three aspects from AIC, business model and product.