AI Adoption, Digital Innovation Capability, and Sustainable Performance: Operational Efficiency as a Strategic Mediator in the Food and Beverage Sector

Abstract

The COVID-19 pandemic has accelerated the urgency of digital transformation for SMEs; however, AI adoption alone is insufficient without digital innovation capabilities and adequate ecosystem support. This study aims to examine the influence of AI adoption and digital innovation capabilities on the sustainable performance of Food and Beverage SMEs in Yogyakarta, with operational efficiency as a mediator and digital ecosystem support as a moderator. A quantitative approach with a cross-sectional survey design was employed, involving 305 F&B SMEs in the Special Region of Yogyakarta selected via purposive sampling. Data were analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM). AI adoption and digital innovation capabilities have a positive and significant effect on both operational efficiency and sustainable performance, both directly and indirectly through the mediation of operational efficiency. However, digital ecosystem support was not found to significantly moderate the effect of AI adoption or digital innovation capabilities on sustainable performance. Operational efficiency acts as a central mediating mechanism that translates digital technology and capabilities into economic, social, and environmental performance outcomes. The lack of significant moderation by digital ecosystem support reveals infrastructure gaps between districts, low digital literacy, ineffective policies, and collaboration that remains transactional in DIY. F&B SMEs are advised to begin adopting AI in operational features such as predictive analytics for demand forecasting, integrating AI with existing digital systems, and actively participating in training and partnerships with universities and local technology providers to strengthen business competitiveness and sustainability.