CREATIVITY AND INNOVATION IN ORGANIZATIONS: A STUDY OF THE IMPACT OF AI

Artificial intelligence (AI) has embedded itself more than ever in contemporary organizations as a tool to facilitate visionary problem-solving, idea generation, and the subsequent conversion of ideas into innovative solutions. Creativity, the formulation of unique and applicable ideas, and innovation capability (IC), the generation and implementation of novelty in an organization, are pivotal to generating a sustainable competitive advantage in uncertain markets. This research compares traditional innovation practices with AI-supported practices and examines the effects of AI adoption (AIA) on organizational creativity (OC) and IC from individual and team levels. Data were collected from 457 workers in Saudi Arabia across manufacturing, IT, and service organizations through structured questionnaires and performance appraisal measures. The researchers used hierarchical linear modeling (HLM) and partial least squares structural equation modeling (PLS-SEM) to conceptualize the relationship between AIA, creative output and innovation performance. To evaluate AI applications based on characteristics such as collaborative engagement (CE) and technical adaptation (TA) related to ideation, prototyping, and process optimization. The reliability and validity of the findings were ensured through Cronbach's alpha, composite reliability (CR), and confirmatory factor analysis (CFA). Regression analysis assessed the predictive power of AIA on creativity and innovation, and correlation analysis clarified the relationships among AIA, creativity and innovation. The adoption of AI increases OC significantly (β = 0.34) and its capacity for innovation (β = 0.28). Creativity mediates innovation (β = 0.42) while CE partially mediates, and TA mitigates these benefits in OC level. The findings demonstrated that AI is better than traditional methods, identify the best organizational designs for AI-led innovation, and provide actionable guidelines for managers on how to approach the alignment of technological capacity and organizational routines to sustain innovation acceptance.