Artificial intelligence capability, CEO-TMT interface and corporate innovation failure

Why Smarter AI Matters for Everyday Companies

New ideas keep companies alive, but many innovation projects quietly collapse, wasting money and momentum. This study asks a simple question with big implications: can artificial intelligence (AI) help companies avoid costly dead ends in their research and development? Focusing on thousands of high-tech firms in China, the authors show that strong AI capabilities do more than speed up discovery—they also make failures less likely, especially when top executives understand digital technology and work together effectively.

Innovation’s Hidden Cost: When New Ideas Fail

Innovation is often celebrated as a sure path to growth, but behind every success lies a long trail of failures. The study highlights that around nine out of ten Chinese high-tech firms have experienced serious innovation setbacks. These failures can mean abandoned products, rejected patents, or projects that never reach the market. The consequences are not just financial; failed efforts can weaken a firm’s long-term competitiveness and strategic direction. Much prior research has focused on what companies learn after things go wrong. This article instead asks how firms might prevent failures in the first place, by spotting risks earlier and making smarter choices as projects unfold.

How AI Changes the Way Firms Take Risks

The authors treat AI not just as a flashy tool, but as a deep organizational capability. Firms with strong AI capability combine three ingredients: tangible assets such as computing infrastructure and data; intangible assets such as algorithms and software; and people with AI skills. Together, these resources help companies process vast amounts of information, connect scattered knowledge, and support more rational decisions. For example, AI systems can scan patent databases, market reports, and customer feedback to detect emerging trends or weak spots in a project. They can also forecast the chances that a research effort will pay off, helping managers pull the plug early on weak ideas instead of pouring in more resources.

Leaders Who Can Speak the Language of Digital Tools

AI alone is not enough. The study finds that top management teams are crucial in turning AI potential into real-world outcomes. When senior executives have strong digital knowledge—through education or work experience in fields like computing, information systems, or e‑commerce—they are better at judging where AI can truly help and where it might mislead. They can align AI projects with business goals, avoid expensive mismatches between technology and strategy, and coordinate across departments such as R&D, operations, and marketing. The data show that in firms where the leadership team has more digital expertise, AI capability is far more effective at reducing innovation failure.

The Power of a Unifying CEO

The chief executive officer also plays a special role in this story. An “integrative” CEO—someone with broad functional experience and a long shared history with other senior leaders—acts as a bridge among different experts. Such CEOs are better able to harmonize perspectives from finance, marketing, engineering, and operations, turning fragmented digital know-how into a coherent strategy. The study’s statistical models reveal that when both the management team’s digital knowledge and the CEO’s integrative leadership are high, AI’s failure-reducing benefits are strongest. In contrast, even a digitally savvy team struggles to fully leverage AI when the CEO does not foster alignment and collaboration.

Evidence from Thousands of Real-World Companies

To test these ideas, the researchers compiled data on 3,829 firm-year observations from 2017 to 2022, focusing on high-tech manufacturers listed on China’s major stock exchanges. They measured innovation failure using patent examination results, treating a higher share of rejected invention patents as a sign that innovation efforts fell short. AI capability was captured through AI-related patents and hiring for AI-related skills. Advanced statistical analyses, along with multiple robustness checks, consistently showed that stronger AI capability is linked to fewer innovation failures. Moreover, this protective effect grows when top managers are digitally knowledgeable and when the CEO plays a strong integrative role. The effect becomes even more pronounced after the COVID-19 pandemic, when uncertainty spiked and firms leaned more heavily on AI.

What This Means for the Future of Smarter Firms

In plain terms, the study’s conclusion is that AI can help companies not only invent more, but also waste less. Firms that invest in AI technologies, build up their AI talent, and embed these tools in decision-making are better at steering away from unpromising projects before they become costly failures. Yet technology by itself is not a magic shield. Its benefits are unlocked when senior leaders understand digital tools and when CEOs encourage collaboration rather than silos. For readers outside the boardroom, the message is clear: the future of innovation will depend as much on how people and machines work together as on any breakthrough algorithm.

Citation: Shang, J., Zhang, K. Artificial intelligence capability, CEO-TMT interface and corporate innovation failure. Humanit Soc Sci Commun 13, 515 (2026). https://doi.org/10.1057/s41599-026-06856-2

Keywords: artificial intelligence, corporate innovation, innovation failure, top management teams, leadership