Abstract

This study explores the role of AI adoption in establishing a sustainable competitive advantage in startups. It examines four factors: 'Effort Expectancy', 'Performance Expectancy', 'Social Influence', and 'Hedonic Motivations' as potential antecedents of AI adoption. The research further conceptualizes and refines constructs of ‘AI-Augmented Information Processing Capabilities (AIPC)’ and ‘Digital Marketing Effectiveness (DME)', respectively, and postulates them as outcomes of AI adoption in startups. The study examines the direct impacts of these variables on the 'Sustained Competitive Advantage' of startups. The results, based on data from 362 Indian startups, suggest that all four factors (EE, PE, SI & HM) have a positive impact on AI adoption intentions of startup entrepreneurs. These results firmly pit these four factors as antecedents of AI adoption. The findings also suggest a positive impact of AI adoption on sustained competitive advantage, which can be partially explained by AIPC and DME. The study further identifies parallel mediation, sequential mediation, and direct effects between AI adoption, AIPC, DME, and SCA. These results underscore the importance of adopting AI and development of AI-augmented information processing capabilities and resultant digital marketing effectiveness to gain sustainable competitive advantage in technology-savvy startup ecosystem. The research provides insights for startup entrepreneurs and other industries to make informed decisions on how AI adoption augurs information processing capabilities for achieving digital marketing effectiveness and sustained competitive advantage.