Unlocking Innovative Work Behavior through Artificial Intelligence Capability: The Mediating Roles of Psychological Empowerment and Knowledge Sharing

Artificial intelligence (AI) capability has become a critical organizational resource for enhancing innovation and sustaining competitiveness in increasingly digital business environments. Despite growing interest in AI adoption, limited empirical evidence explains how AI capability translates into employees' innovative work behavior (IWB), particularly in small and medium-sized enterprises (SMEs), where innovation depends heavily on human capital rather than formal research and development. Drawing on the Ability–Motivation–Opportunity (AMO) Theory, this study develops and tests a model in which Psychological Empowerment (PE) and Knowledge Sharing Behavior (KSB) mediate the relationship between Artificial Intelligence Capability (AIC) and Innovative Work Behavior. A quantitative cross-sectional survey was conducted among 350 Indonesian SME employees with experience using AI-enabled digital technologies. The proposed model was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results demonstrate that AI capability significantly enhances innovative work behavior both directly and indirectly by strengthening employees' psychological empowerment and encouraging knowledge-sharing behavior. The mediation analysis further confirms that empowered employees who actively exchange knowledge are more likely to transform AI-enabled resources into innovative workplace practices. These findings extend AMO Theory by conceptualizing AI capability as an organizational ability that creates employee innovation through complementary motivational and opportunity mechanisms. This study contributes to the emerging literature on AI-enabled organizational innovation by integrating technological, psychological, and behavioral perspectives into a unified framework within the SME context. From a managerial perspective, the findings suggest that investments in AI technologies should be accompanied by initiatives that cultivate employee empowerment and collaborative knowledge exchange to maximize innovation outcomes and improve organizational competitiveness.