Determinants of SME performance : The mediating role of al adoption and moderating role of digital marketing within the technological, organizational and environment framework

Artificial Intelligence (AI) is transforming global business operations; however, its adoption among small and medium-sized enterprises (SMEs) in emerging markets remains relatively underexplored. Existing scholarship provides limited insights into the impact of AI adoption on SME performance in Pakistan. This study investigates the interrelationships among technological, organizational, and environmental factors, AI adoption, and SME performance within Pakistani manufacturing SMEs. Additionally, it examines the mediating role of AI adoption and the moderating effect of digital marketing strategies. Data were collected using judgmental sampling from 789 senior and middlelevel managers across four manufacturing sectors in Pakistan: textiles, leather, sports goods, and surgical instruments. Data analysis was conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that relative advantage is the most influential driver of AI adoption in Pakistani manufacturing SMEs, followed by technology readiness, leadership vision, and trading partnerships. Further analysis shows that AI adoption significantly mediates the relationship between technological and environmental factors and SME performance. Moreover, digital marketing strategies strongly moderate this relationship, enhancing customer engagement and operational efficiency. These empirical results underscore the importance of perceived benefits and internal readiness as critical enablers supported by visionary leadership and collaborative partnerships. Theoretically, this study contributes by integrating the Technology- Organization-Environment (TOE) framework, the Diffusion of Innovation (DOI) theory, and the Resource-Based View (RBV) into a unified model specifically tailored for SMEs in an emerging economy. By analyzing the direct effect of technological, organizational, and environmental factors, mediating roles of AI adoption, and moderating roles of digital marketing, the research advances current knowledge in the field. Practically, the findings suggest that business leaders should prioritize AI-driven innovation and strategic digital marketing initiatives to enhance SME performance