Abstract

Artificial intelligence (AI)-powered service innovation (e.g., OpenAI’s ChatGPT, Google’s Bard and Microsoft’s Sydney) has become one of the most significant determinants of firms' success in the fourth industrial revolution. However, extant studies on this topic show that research studies hitherto have been ad-hoc, lacking a conceptual framework for the strategic management of AI-powered service innovation capability in dynamic markets. Thus, this study synthesises the current body of knowledge, proposes a framework, and develops an agenda to advance our knowledge. The findings reveal: (1) AI-market capability relates to customer orientation, industry orientation, and cross-functional orientation; (2) AI-infrastructure capability relates to data, business models, and ecosystem; and (3) AI-management capability relates to AI-orientation, organisational learning, and AI ethics which are crucial determinants of forming AI-powered service innovation capability. These capabilities for the strategic management of AI-powered service innovations play an essential role in achieving organizational agility and competitive advantage.