AI-Driven Leadership and the Innovation Paradox: More Innovation Activity, Lower Innovation Quality

Abstract

Artificial intelligence is increasingly reshaping leadership practices and organizational decision-making, yet its implications for innovation outcomes remain insufficiently understood. Existing research largely assumes that AI-driven leadership enhances innovation while paying limited attention to its effects on the human capabilities required to sustain innovation quality. This study examines whether AI-driven leadership creates an innovation paradox in which increased innovation activity is accompanied by declining innovation quality. Cross-sectional self-reported data were collected from 2990 employees working in digitally intensive organizational environments. A split-sample EFA–CFA validation procedure was applied, and the proposed framework was tested using structural equation modeling. AI-Driven Leadership was positively associated with Innovation Activity and Human Capital Erosion. Human Capital Erosion was negatively associated with Innovation Quality, while Innovation Activity was also negatively associated with Innovation Quality. Mediation analysis indicated a substantial indirect association between AI-Driven Leadership and Innovation Quality through Human Capital Erosion. Organizational Learning Erosion did not significantly influence Innovation Quality and did not mediate the proposed relationships. The findings suggest an innovation paradox whereby AI-driven leadership is associated with higher innovation activity while simultaneously being associated with greater human capital erosion, potentially reducing innovation quality. Accordingly, preserving human capital may be important for sustaining innovation quality in AI-enabled organizations.