Digital adoption as a compensatory mechanism for resource scarcity: Entrepreneurial Leadership, Sustainable Innovation and National AI Capacity in Emerging Economies

Abstract

Research on entrepreneurial leadership, digital transformation and sustainable innovation remains fragmented, confined largely to single-country samples and cross-sectional in design. Few studies observe all three in the same entrepreneurs, compare emerging with advanced economies or consider how intensively countries actually use artificial intelligence (AI). This study asks whether digital transformation links leadership to sustainable innovation and growth, and whether national AI capacity amplifies that link or whether digital tools instead substitute for resource scarcity. Drawing on institutional-voids theory, we analyse Global Entrepreneurship Monitor data on 86,176 entrepreneurs in 58 economies (2021–2022), linked to national measures of AI preparedness, revealed generative-AI use and developer density. Leadership is modelled as a latent construct and tested for measurement invariance; associations are estimated with country × year fixed effects, a multi-group structural equation model and doubly robust estimators, complemented by a difference-in-differences analysis of the release of ChatGPT. Entrepreneurial leadership is associated with digital adoption, product innovation and growth expectations, including among entrepreneurs who lead employees or co-owners. Digital adoption is associated with 7–14 percentage points more in environmental, social and innovative activity, and these associations survive omitted-variable bounds, timing checks and common-method tests. The link between digital adoption and environmental action is about 2.5 times stronger in emerging economies and weakens as national AI capacity rises, whereas national AI capacity does not amplify leadership, and the release of ChatGPT left no detectable mark on national business entry. The results support a substitution rather than an amplification view of the AI era: digital tools contribute most to sustainable entrepreneurship where institutional and technological capabilities are scarcest.