How Does Cost Leadership Strategy Suppress the Performance Benefits of Explainability of AI Applications in Organizations?

Abstract

This study examines how explainable artificial intelligence-enabled agility, encompassing operational and market agility, influences performance. We examine the potentially negative effect of a cost-leadership strategy on the performance benefits of explainable AI. Data from a survey of IT executives was analyzed. Findings suggest that the explainability of artificial intelligence applications does not directly relate to performance. Instead, its benefits are actualized through operational and market agility. However, our study finds that in organizations that prioritize cost leadership, the positive link between explainability and performance becomes negative and significant. Additionally, the mediating roles of operational and market agility become insignificant in such organizations.