Barriers to generative AI adoption in SMEs: Role of knowledge assimilation in the technology–organization–environment framework

Generative artificial intelligence (GenAI) is transforming global business models, yet its adoption among small and medium-sized enterprises (SMEs) in developing economies remains poorly understood. Although prior studies examine AI adoption broadly, the unique barriers associated with Generative AI in resource-constrained contexts are under-theorized. This study addresses this gap by extending the Technology–Organization–Environment (TOE) framework to explain the conditions under which Nigerian SMEs adopt GenAI. Using survey data from 319 SME owners, the findings reveal that technological, organizational, and environmental barriers significantly influence adoption, with environmental constraints exerting the strongest effect. The study contributes theoretically by incorporating Knowledge Assimilation as a mediating mechanism, demonstrating how internal learning capabilities shape firms’ ability to respond to external and organizational pressures. By situating the analysis within Nigeria’s SME ecosystem, the research refines understanding of GenAI adoption in developing economies and identifies important boundary conditions that inform future empirical and theoretical work.