Harnessing Artificial Intelligence for Green Business Model Innovation: The Role of Environmental Awareness in Pakistani SMEs

Abstract

The focus of this study is the impact of AI-driven decision-making tools on fostering green business model innovation (GBMI) in Pakistani textile and apparel SMEs, particularly on the mediating role of entrepreneurs' environmental awareness. Applying Dynamic Capabilities Theory and the Resource-Based View, the study proposes that AI adoption enhances GBMI both directly and indirectly by increasing eco-entrepreneurs' awareness. Surveying 210 SME owners, the study gathered quantitative data and analyzed the data using correlation, regression, and bootstrapped mediation analyses (PROCESS Model 4). AI was found to have a positive impact on GBMI and environmental awareness, while the latter partially mediated the relationship between AI and GBMI. Respondents' answers on the questionnaire reflected these realities. Respondents' answers on the questionnaire reflected these realities. Having AI realized on the GBMI, driven solely by the zeal of eco-entrepreneurs, demonstrates how technology and self-responsive behavior come together to incubate innovation. This novel study combines the theories of digital entrepreneurship and responsible sustainable entrepreneurship, adding value to SME managers and policymakers to foster eco-innovation in emerging economies.