Firms increasingly invest in artificial intelligence(AI) to enhance market adaptability. Although prior research reveals AI’s optimization potential, whether AI-driven innovation generates disruption remains unclear. This study examines the mechanisms linking AI-driven innovation to market competitiveness. The regression results indicate that AI-driven radical innovation exerts a stronger effect than incremental innovation, highlighting a shift in the role of AI from optimization toward disruption. AI-driven innovation demonstrates stronger effects in concentrated, non–technology-intensive industries and operates through positive media attention, alleviated financial constraints, and reduced cost stickiness. Our findings imply that managers should balance AI-driven radical and incremental innovation portfolios with industry context.
Xu et al. (2026) studied this question.