IMPACT OF THE INTERNET OF THINGS, DYNAMIC CLOUD CAPABILITIES, ARTIFICIAL INTELLIGENCE, DIGITAL CAPABILITIES, DIGITAL INNOVATION, AND IT FLEXIBILITY ON FIRM PERFORMANCE

Abstract

The rapid evolution of digital technology in the banking sector presents both opportunities and challenges, particularly in the context of Islamic banking in Kingdom of Saudi Arabia (KSA), where the integration of technology must align with Shariah principles. This study investigates the impact of Internet of Things (IOT), dynamic cloud capabilities, artificial intelligence (AI), digital capabilities, digital innovation, and IT flexibility on firm performance within the Islamic banking n KSA. The research used a quantitative research design based on a deductive approach. Moreover, survey questionnaires were administered to 605 middle-level managers across four (4) major Islamic banks in KSA. The data were analyzed using Statistical Package for the Social Sciences (SPSS) and Partial Least Squares Structural Equation Modeling (PLS-SEM), facilitating exploratory data analysis, confirmatory factor analysis, path analysis, and mediation and moderation analyses. from Based on fourteen hypothesis developed on seven (7) hypothesis were supported. The research found a positive and significant relationship between IOT capabilities, AI capabilities and digital innovation with firm performance. However, there is no relationship between dynamic cloud capabilities and firm performance. The research also found a positive and significant relationship between AI capabilities on digital innovation. However, there is no relationship between (IOT capabilities, dynamic cloud capabilities) and digital innovation. In addition, the research found digital innovation mediate the relationship between AI capabilities, and firm performance. However, it is found that digital innovation does not mediate the relationship between (IOT capabilities, dynamic cloud capabilities) and firm performance. The research also found that digital capabilities moderate the relationship between AI capabilities and digital innovation. However, digital capabilities do not moderate the relationship between (IOT capabilities, dynamic cloud capabilities) and digital innovation. Likewise, the research found IT Flexibility moderate the relationship between digital innovation, and firm performance. The research results, expanded the theoretical body of knowledge through its research findings from the context of Islamic banks in KSA. The results are important to the stakeholders of Islamic banks in KSA, as it underscored the critical role of strategic digital technology integration and innovation in enhancing its competitiveness and operational efficiency. The research also provided valuable insights for the policymakers to develop policy that would enhance firm performance in Islamic Banking in KSA. The research results are limited to the Islamic banking in KSA; and cannot be generalized to the entire banking sector in KSA.