ARTIFICIAL INTELLIGENCE ADOPTION AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN NAIROBI COUNTY, KENYA: THE MODERATING ROLE OF DIGITAL SKILLS

Linet K. Njeri, Mark O. Wekesa, Amina S. Hassan

Abstract


Artificial Intelligence (AI) has become a transformative capability for enterprises seeking efficiency, market expansion, and improved customer engagement. However, empirical evidence on AI adoption and SME performance in developing economies remains limited, particularly in the Kenyan context where SMEs operate under resource constraints and uneven digital readiness. This study examines the effect of AI adoption on the performance of SMEs in Nairobi County, Kenya, focusing on four dimensions of AI adoption: AI-driven marketing, AI-enabled operations automation, AI-supported customer engagement, and AI-based decision support. Additionally, the study assesses the moderating role of digital skills in the relationship between AI adoption and SME performance. A descriptive cross-sectional design is proposed, targeting SME owners and managers in Nairobi County. Data was collected using structured questionnaires and analyzed using descriptive statistics and multiple regression analysis, including moderation testing via interaction effects. The study anticipates that AI adoption will have a statistically significant positive influence on SME performance, and that higher levels of digital skills will strengthen the effect of AI adoption on performance. The findings are expected to offer practical guidance to SME managers on high-impact areas of AI utilization and inform policymakers on SME digital capacity-building initiatives.


Keywords: Artificial Intelligence adoption, SME performance, digital skills, digital transformation, Kenya, entrepreneurship.


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