European Journal of Studies in Management and Business

Small firms in emerging economies are often unaware of technology’s benefits. Technology assimilation tools are not common in their skill domain or business culture. Their absorptive capacity is very low, since they are usually pressed with operational problems. But artificial intelligence and digital technologies are powerful changes, modifying their competitive environment. The use of AI tools, and particularly generative AI, represents a further domain in which traditional businesses’ ability to assimilate the technology will be further challenged. Our research operationalizes specific capabilities that small firms must develop to assimilate and use AI in their operations, particularly in strategic decision-making. Evidence from case studies and AI use-case analyses from small firms in Latin America is used to illustrate the stages and capabilities that enable a firm to assimilate AI into strategic decision-making. Use case analysis explains the relationship between the use of artificial intelligence in small firms and their innovation capabilities in the Latin American economic context. A model of the process of dynamic capability development and the growth of absorptive capacity is proposed for guidance in future research in the Latin American context.