ABSTRACT This study investigates how artificial intelligence (AI) capability and digital agility shape strategic innovation in firms, and how government intervention and competitive intensity condition these effects. Using survey data from 310 Chinese firms that have adopted AI technologies, we employ structural equation modeling to test the proposed hypotheses and estimate the relationships among the focal constructs. The results show that AI capability and digital agility are both positively associated with strategic innovation. Moreover, government intervention strengthens the positive effect of AI capability on strategic innovation, whereas competitive intensity amplifies the positive effect of digital agility on strategic innovation. These findings indicate the complementary roles of internal digital capabilities and external contextual forces in enabling strategic innovation in digitally intensive environments. By integrating AI capability and digital agility within a moderated framework, this study advances strategic innovation research by clarifying when and how digital capabilities translate into innovation outcomes. The study also offers actionable implications for managers and policymakers seeking to foster strategic innovation through AI deployment and organizational agility across varying institutional and competitive conditions.
Liu et al. (2026) studied this question.