Purpose This study examines how AI literacy shapes workplace equality and competitive advantage, with particular attention to the mediating role of psychological capital. Design/methodology/approach Using survey data from 467 owner-managers, managers and senior staff in small- and medium-sized enterprises in Surabaya, Indonesia, the study applies partial least squares structural equation modeling (PLS-SEM) to test the proposed relationships. Findings AI literacy exhibits a statistically significant yet modest direct effect (ß = 0.133, p 0.05) on workplace equality and competitive advantage. However, its primary influence operates indirectly through psychological capital (strong path: ß = 0.600, p 0.001), which fosters self-efficacy, resilience, optimism and hope, thereby driving equality (ß = 0.531, p 0.001) and firm performance. Psychological capital, in turn, significantly promotes workplace equality, emerging as a pivotal antecedent to competitive advantage (ß = 0.494, p 0.001). These patterns underscore AI literacy's role as a human-centered amplifier in resource-constrained SMEs. Practical implications Beyond technical training, integrate PsyCap-building interventions (e.g. resilience workshops paired with AI ethics modules) into SME support programs, drawing on evidence from Indonesian contexts to foster inclusive AI adoption and align with UNESCO equity goals. Originality/value By conceptualizing AI literacy as a socially embedded capability, this study demonstrates that AI functions as a social amplifier: its performance and equality outcomes depend less on technology itself than on how it reshapes human agency and psychological capacity in organizational contexts.
Pratono et al. (2026) studied this question.