AI Adoption and Dynamic Capabilities in Chinese SMEs: the Mediating Role of Digital Entrepreneurial Orientation—A Conceptual Framework

This paper develops a conceptual framework that examines how artificial intelligence (AI) adoption may influence dynamic capabilities in Chinese small and mediumsized enterprises (SMEs), with digital entrepreneurial orientation (DEO) as a proposed mediating mechanism. Drawing on dynamic capabilities theory and the digital entrepreneurship literature, the paper argues that AI adoption does not automatically translate into dynamic capabilities. Rather, AI adoption may foster DEO—comprising digital innovativeness, digital proactiveness, and digital risktaking—which in turn may help firms sense opportunities, seize them, and reconfigure resources. Three testable propositions are developed. The framework contributes to dynamic capabilities theory by specifying DEO as a strategic mediating pathway through which AI resources may be converted into organizational capabilities. It also offers implications for SME managers and policymakers seeking to support digital transformation under resource constraints.