The impact of artificial intelligence capabilities on institutional performance: the mediating role of dynamic capability

Purpose This paper aims to investigate the relation between artificial intelligence (AI) capability, dynamic capability and institutional performance in Northern Cement Plants in Iraq. It further investigates whether dynamic capability mediates the relation between AI capability and institutional performance. Design/methodology/approach The study adopted a quantitative, cross-sectional design based on survey data collected from employees and managers in Northern Cement Plants in Iraq. A total of 331 usable responses were analysed using partial least squares structural equation modelling (PLS-SEM) in SmartPLS 4. Artificial intelligence capability was modelled through technology, technical skills, business skills and data capability, while dynamic capability was represented by sensing, seizing and reconfiguration and institutional performance was measured through financial and customer perspectives, learning, growth and internal processes. Findings The findings show that AI capability has a significant positive effect on dynamic capability. However, artificial intelligence capability does not have a significant direct effect on institutional performance and dynamic capability does not significantly influence institutional performance. The mediating effect of dynamic capability in the relationship between artificial intelligence capability and institutional performance is also not supported. These findings propose that artificial intelligence capability contributes more clearly to strengthening organisational adaptability than to producing immediate institutional performance gains. Originality/value This study adds to the literature by examining the links among artificial intelligence capability, dynamic capability and institutional performance in the context of Northern Cement Plants in Iraq, which remains underexplored in prior research. It provides empirical evidence that artificial intelligence capability strengthens dynamic capability, while also showing that the path from capability development to institutional performance may be more conditional and less direct than commonly assumed.