Name: Dr Sudharani V G
Country: India

Year: 2026
Volume: Volume No: 13, Issue No: 1, Year: 2026
Page Number: 358-372
DOI: https://doi.org/10.5281/zenodo.20406374

Artificial Intelligence has become an effective technology that can revolutionize the
operational and competitive capabilities of the micro, small, and medium enterprises.
However, while financial constraints, infrastructure, digital capability and technological
preparedness are often a challenge for MSMEs, there are growing opportunities for process automation, predictive analysis, personalisation, quality improvement, and better managerial decision making made possible by AI-enabled tools. The research in this study aims to provide conceptual and empirical analysis of the impact of AI on operational efficiency and competitive advantage for MSMEs. Based on the Resource Based View and the TechnologyOrganization–Environment, the study presents evidence that AI adoption has a positive impact on operational efficiency in terms of process delays, costs of operation, accuracy and responsiveness. It is hypothesized that AI usage will be mediated by operational efficiency and competitive advantage. The framework also includes recognition of the importance of the following: organizational readiness, digital skills and innovation capacity. The study is a novel addition to the body of literature on MSME digital transformation as it combines the adoption of technology with operational performance and strategic competitiveness. The results provided actionable insights for MSME owners, policy-makers, technology vendors, and development organizations aiming to improve the competitiveness of small businesses in the AI era.