The Impact of Artificial Intelligence on Innovation: The Moderating Role of Digital Infrastructure in the UAE

Abstract

This study examines the relationship between Artificial Intelligence (AI) adoption and innovation performance, emphasizing the moderating role of digital infrastructure in the context of the United Arab Emirates (UAE). Drawing on general-purpose technology and complementarity theories, the study argues that the innovation benefits of AI are contingent upon the availability of supportive digital infrastructure rather than being automatically realized through AI adoption alone. Using survey data collected from organizations across key sectors in the UAE and analyzed through Partial Least Squares Structural Equation Modeling (PLS-SEM), the results reveal that AI adoption does not exert a statistically significant direct effect on innovation performance. In contrast, digital infrastructure demonstrates a strong and significant positive effect on innovation performance. More importantly, the interaction between AI adoption and digital infrastructure is positive and statistically significant, confirming that digital infrastructure strengthens the effect of AI adoption on innovation outcomes. The model explains a substantial proportion of variance in innovation performance and exhibits satisfactory predictive relevance. These findings contribute to the literature by clarifying the contextual conditions under which AI drives innovation and by empirically validating digital infrastructure as a critical moderating mechanism. From a practical perspective, the results highlight the importance of coordinated investments in AI capabilities and digital infrastructure to maximize innovation returns in digitally ambitious economies such as the UAE.