Green entrepreneurial leadership and AI-driven green process innovation: Advancing environmental sustainability in the Traditional Chinese Medicine industry

Despite much focus has been given on the relationship between leadership, innovation and firm performance, the impact of green entrepreneurial leadership (GEL) and Artificial Intelligence - driven green process innovation (AI-driven GPI) on firm performance (financial and environmental) remains unclear. Based on upper echelons theory, this study hypothesized that GEL has a positive impact on AI-driven GPI, while green technology turbulence (GTT) moderates this relationship. AI-driven GPI acts as a mediator between GEL and firm performance. We tested the research hypotheses using data from 255 Small and Medium Size Enterprises in China's Traditional Chinese Medicine manufacturing industry. The results indicate that GEL positively impacts AI-driven GPI, while GTT negatively moderates this effect. Moreover, AI-driven GPI mediates the GEL - firm performance relationship. This study enhances the understanding of GEL as a unique leadership behavior that encourages innovation, identifies potential opportunities, and takes risks when leveraging AI-driven GPI to improve firm performance. Furthermore, this study addresses the debate on AI's role in environmental sustainability, identifying AI-driven GPI as a strategic pivot for change in governance, values, and culture within firms. The study concludes by providing suggestions for firms to achieve financial and environmental performance in an uncertain technological environment, thereby providing new insights for future research. Based on these findings, policymakers should develop incentives and frameworks to promote AI-driven GPI and incorporate GEL into leadership practices, enhancing firm competitiveness in the Industry 5.0 era and advancing the Sustainable Development Goals.