Artificial Intelligence in Small and Medium Enterprises: Its Influence on Business Performance in the Bangsamoro Autonomous Region in Muslim Mindanao

Abstract

Artificial intelligence (AI) is a key driver of digital transformation, yet its adoption among small and medium enterprises (SMEs) remains uneven, particularly in developing regions. This study examined the readiness of SMEs in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), Philippines, to adopt AI and its relationship with business performance using the Technology–Organization–Environment (TOE) framework. A quantitative descriptive–correlational design was employed, with data collected from 150 SME owners and managers, and analyzed using descriptive statistics and Pearson correlation. The results indicate that SMEs demonstrate moderate technological and organizational readiness but low environmental readiness, reflecting limited external support and market demand. Business performance was also found to be moderate, suggesting that AI adoption yields incremental improvements in operational and economic outcomes. Correlation analysis revealed that AI readiness is significantly associated with business performance, with organizational readiness showing the strongest influence. The study concludes that SMEs are in a transitional stage of digital transformation, where internal capabilities play a more critical role than external factors, and emphasizes the need to strengthen human capital, technological capacity, and institutional support to enhance AI adoption and competitiveness.