Abstract
Small and Medium Enterprises (SMEs) constitute a huge portion of Indonesia's economy, yet their productivity lags developed nations. This study investigates the impact of Artificial Intelligence (AI) adoption on SME productivity, considering intervening variables. Using an explanatory quantitative approach, data from 200 SME workers in Indonesia were analyzed through Partial Least Square (PLS) analysis. Results indicate a significant positive relationship between AI adoption and high costs, as well as a reduction in the lack of knowledge. Moreover, high costs and knowledge deficits negatively affect productivity. However, AI adoption does not significantly influence inadequate infrastructure, which in turn does not significantly impact productivity. These findings underscore the potential of AI adoption in mitigating challenges within SMEs and enhancing productivity in Indonesia's economic landscape. Efforts to overcome these challenges and encourage AI adoption promise to increase the competitiveness of SMEs and contribute to national economic growth.
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