Unlocking Sustainable Growth: How GenAI Capabilities Drive Green Innovation in Internationalizing SMEs
The emergence of Generative Artificial Intelligence (GenAI) marks a profound technological shift, offering unprecedented opportunities for enterprises to boost productivity, streamline processes, and gain competitive advantages. This is particularly relevant for Small and Medium-sized Enterprises (SMEs), which, despite often facing resource constraints, can significantly benefit from GenAI adoption. As firms increasingly expand globally while facing pressure to minimize environmental impact, the intersection of GenAI capabilities with international green innovation becomes a critical area of research. This study delves into this underexplored domain, investigating how GenAI capability influences internationalization green innovation performance in cross-border e-commerce SMEs.
Drawing on the Resource-Based View (RBV), which posits that sustainable competitive advantage can be achieved by leveraging valuable, rare, inimitable, and non-substitutable resources, this research reveals that GenAI capability acts as a cutting-edge technological resource with the potential to transform firms’ innovation processes and outcomes. The findings demonstrate that GenAI capability influences internationalization green innovation performance through both direct and indirect pathways.
Direct Influence: GenAI capability positively and directly influences internationalization green innovation performance, albeit with a modest effect size. By harnessing GenAI, SMEs can enhance their ability to develop eco-friendly products and services, improve the environmental performance of their processes, and implement innovative green technologies across international operations. GenAI’s advanced data processing and predictive capabilities empower firms to identify emerging sustainability trends, optimize resource allocation, and make more informed decisions regarding green innovation initiatives in diverse international contexts. It also facilitates knowledge sharing and collaboration across global value chains, fostering a more holistic approach to sustainability innovation. This direct impact helps firms accelerate the development and commercialization of green technologies, leading to improved environmental performance and competitive advantage in international markets.
Indirect Influence (Mediated by Supply Chain Ambidexterity Innovation): The study highlights that supply chain exploratory innovation and supply chain exploitative innovation serve as crucial mediating mechanisms through which GenAI capability influences internationalization green innovation performance. This dual capacity, known as supply chain ambidexterity, is vital for sustained competitive advantage in dynamic environments.
- Influence on Supply Chain Exploratory Innovation: GenAI capability strongly influences supply chain exploratory innovation. This involves seeking radically new knowledge, experimenting with novel technologies, and developing entirely new processes within the supply chain to enhance flexibility and adaptability. GenAI allows firms to simulate and evaluate a wider range of potential solutions, identify emerging trends, and experiment with novel approaches to supply chain management, helping them break from traditional paradigms to uncover innovative solutions for efficiency, resilience, and sustainability. Interviewed executives confirmed using GenAI to “simulate and test novel supply chain configurations, leading to breakthroughs in sustainability and efficiency”.
- Influence on Supply Chain Exploitative Innovation: GenAI capability also strongly influences supply chain exploitative innovation. This focuses on refining and improving existing supply chain processes, leveraging current knowledge and technologies to enhance efficiency, reduce costs, and increase reliability. GenAI can analyze real-time data to identify bottlenecks, recommend adjustments for streamlining operations, and predict demand fluctuations with greater accuracy. This leads to optimized inventory levels, reduced waste, and more efficient logistics. As one interviewee stated, GenAI allowed them to “optimize existing processes, reducing waste and improving responsiveness to market demands”.
These supply chain innovations, in turn, drive internationalization green innovation performance:
- Exploratory innovation in the supply chain leads to breakthrough environmental innovations by developing novel solutions and radical approaches to managing global supply chain operations, helping firms reduce their environmental footprint and create eco-friendly products for international markets.
- Exploitative innovation leads to enhanced environmental performance through refining and optimizing existing processes for efficiency and reliability in international operations, steadily enhancing environmental performance and resource efficiency through incremental improvements.
Interestingly, the study found that Artificial Intelligence (AI) regulation strengthens, rather than weakens, the positive relationship between GenAI capability and supply chain innovation. This unexpected finding suggests that well-designed regulations can actually foster more responsible and sustainable technological practices by encouraging firms to develop more robust and ethical AI systems.
This research, conducted using a mixed-methods approach including partial least squares structural equation modeling (PLS-SEM), importance-performance map analysis (IPMA), fuzzy-set qualitative comparative analysis (fsQCA), and semi-structured interviews with 377 cross-border e-commerce SMEs in China, provides valuable insights for policymakers and business leaders on effectively managing the societal implications of AI adoption while pursuing sustainability goals. It advances the understanding of GenAI’s role in driving sustainable internationalization by illuminating the operational pathways through which GenAI enhances green innovation performance in the context of global markets and environmental pressures.
Reference for the Article:
Wang, S., & Zhang, H. (2025). Generative artificial intelligence and internationalization green innovation: Roles of supply chain innovations and AI regulation for SMEs. Technology in Society, 82, Article 102898. https://doi.org/10.1016/j.techsoc.2025.102898.
