Artificial Intelligence (AI)-driven entrepreneurial strategies and customer-related performance of SMEs in Sanchez Mira, Cagayan, Philippines: an exploratory mixed-methods case study

Small and Medium Enterprises (SMEs) play a vital role in sustaining local economies in the Philippines, particularly in rural municipalities such as Sanchez Mira, Cagayan. Operating within resource-constrained environments, these firms increasingly leverage digital applications to survive. This study examines the exploratory links between Artificial Intelligence (AI)-driven entrepreneurial strategies and customer-related performance among rural SMEs. Anchored on the Technology–Organization–Environment (TOE) framework and Entrepreneurial Orientation (EO) Theory, the study adopts an exploratory, qualitative-dominant mixed-methods design. Quantitative baseline data from a purposive sample of 50 SME owners and managers were analyzed alongside deep qualitative insights from semi-structured interviews to evaluate operational realities. To ensure construct validity, a strict conceptual threshold was established to distinguish true AI-supported capabilities (e.g., Natural Language Processing chatbots, predictive analytics dashboards) from basic digital automation. Baseline exploratory regressions indicate that localized AI adoption is positively associated with adaptive entrepreneurial strategies ( $$B = 0.61$$ B = 0.61 , p < .001,R² = .37 p < . 001 , R 2 = . 37 ). Moreover, these strategies demonstrate positive tentative paths toward customer satisfaction ( $$B = 0.67,p < .001$$ B = 0.67 , p < . 001 ), customer retention ( $$B = 0.59,p = .002$$ B = 0.59 , p = . 002 ), and responsiveness ( $$B = 0.64,p = .001$$ B = 0.64 , p = . 001 ). Qualitative thematic analysis reveals how low digital literacy and infrastructure deficits force the emergence of highly informal, localized entrepreneurial strategies that diverge from Western-centric EO frameworks. The qualitative insights also uncover a profound rural paradox: the friction between automated, impersonal AI interfaces and the deeply rooted, community-centric kinship systems characteristic of rural markets. This study repositions the localized experiences of Sanchez Mira as a transferable diagnostic blueprint for digital transformation frameworks in peripheral, emerging economies across the Global South.