This study aims to explore the impact of artificial intelligence (AI) integration on economic performance, focusing on the roles of frugal innovation and business model innovation as mediators. Utilizing a quantitative research design, data were collected from secondary sources, including industry reports and databases like the World Bank and OECD. The sample comprised 177 firms across various sectors, with a focus on small and medium-sized enterprises (SMEs). The findings reveal that AI-driven innovation significantly enhances economic performance, both directly and through its positive impact on real economy innovation. AI Integration Readiness (AIR) amplifies the AIDI→REI link yet shows a non-significant total moderation on EP (p = 0.15; BF10 = 1.8, anecdotal evidence for H0). Challenges such as the negative impacts of AI readiness on performance highlight the need for targeted support for SMEs. The study concludes that fostering AI capabilities and readiness is crucial for overcoming bottlenecks and achieving optimal economic outcomes, emphasizing the importance of supportive policies and infrastructure for broad-based AI adoption. These insights provide valuable implications for policymakers and business leaders aiming to leverage AI for sustainable economic growth and innovation.
Li et al. (2026) studied this question.