AI Awareness and Strategic Agility in Small Retail Businesses

I. Introduction, Problem Statement, and Research Question

As AI continues to shape everyday life, small retail businesses are uniquely positioned to take advantage of emerging AI offerings. Because AI evolves nearly weekly, large corporations must adopt new technologies more cautiously, relying on extensive governance processes to protect intellectual property which can limit available tools and use cases. Smaller owner-operated businesses, by contrast, have greater flexibility to remove unnecessary red tape and independently determine their tolerance for security risk relative to their need for agility.

The small retail sector is therefore particularly ripe for disruption, as many AI use cases may not be immediately apparent to owner-operators. This lack of visibility may lead owners to view AI as something useful on occasion, or as an advantage better suited to larger firms rather than their own businesses. As a result, small retail businesses may delay adopting AI until competitors gain an advantage, especially when the perceived benefits are unclear. Additionally, some owners may avoid AI altogether due to the belief that it requires technical expertise, preventing them from exploring its broader capabilities.

What remains unclear is whether awareness of AI capabilities empowers small retail owners to adapt more strategically, or whether it contributes to hesitation and inaction by diverting attention away from core business decisions.

II. Research Purpose and Significance

The purpose of this study is to understand the relationships between the depth of AI awareness and a small business owner's ability to act with strategic agility. While the industry constantly produces new AI tools, an owner's understanding of what these tools are capable of doing may have a greater impact on strategic decision-making than knowing how to use them.

By examining this relationship, the study seeks to better understand how emerging technologies influence a small business owner's ability to adapt strategically in a changing competitive environment. From a strategic perspective, this research treats AI awareness as a managerial capability that shapes how small retail owners adjust strategy in response to change. Clarifying how owners can leverage varying levels of awareness may help inform more deliberate strategic choices and provide practical guidance for navigating an increasingly uncertain AI landscape.

III. Conceptual Framework and Hypothesis

Key Constructs

• —AI Awareness, The understanding of what AI tools and applications exist and what those applications can do.
• —Strategic Agility, A firm's capacity to quickly recalibrate strategy, redirect resources, and pursue new opportunities in response to changing conditions.

Hypotheses

1. H1. As AI awareness among small retail business owners increases, strategic agility increases.
2. H2. The positive effect of AI awareness on strategic agility decreases as firm size increases.

This study draws on dynamic capabilities theory, positioning AI awareness as a managerial capability that shapes a small retail business's strategic agility (Teece et al., 1997). AI awareness is expected to influence strategic agility by expanding owner-operators' understanding of the range of business applications AI can support. However, this relationship is expected to be weaker in larger firms, as additional stakeholders and processes can slow decision-making and limit the ability to translate awareness into agile strategic action.

IV. Literature Context and Gap

AI awareness is a construct that is still being defined. Li et al. (2025) define AI awareness as an employees' subjective evaluations of AI technologies (p. 1). Moldt et al. (2024) briefly address AI awareness, conceptualizing it as familiarity with AI and as a possible antecedent rather than a focal construct. Current research shows that AI awareness and strategic agility are connected through outcomes such as creativity (Ameen et al., 2024). However, this study challenges the assumption that AI awareness merely supports downstream outcomes, arguing instead that AI awareness within small businesses may contribute to strategic agility itself.

Strategic agility is well established in literature and primarily examined in high-technology and knowledge-intensive industries and defined as a concept [that] encompasses the rapid responses of firms towards opportunities and risks sprouting from the business environment (Sampath et al., 2021, p. 103). This emphasis suggests that, within small retail businesses, particularly those operating with varying levels of technological knowledge, there is an opportunity to further examine strategic agility and its relationship to emerging AI awareness.

Existing research largely frames AI awareness as an employee-level perception or as an antecedent to creativity or technology adoption. This research seeks to challenge that framing by positioning AI awareness as a strategic capability that directly influences agility. Sampath et al.'s (2021) claim that strategic agility is most clearly understood in tech-forward industries further indicates that these findings may not fully translate to small retail settings, where strategic decisions are owner-driven and technological competencies vary. Because small retail businesses often operate with limited hierarchy and centralized decision-making, they may exhibit distinct forms of strategic agility. AI awareness may therefore influence whether strategic agility increases or decreases across small retail firms.

V. Expected Contributions, Future Research, and Approach

This research advances management and organization research by reframing AI awareness as a strategic capability that influences strategic agility in small retail firms operating under technological uncertainty. Current business articles and academic journals often focus on AI tools and technical specifics while overlooking the role of awareness as a strategic lever. This research could encourage additional studies within small retail and non-tech industries to examine whether the relationship between AI awareness and strategic agility varies across contexts. Future research may also identify additional conditions influencing the relationship between AI awareness and strategic agility beyond firm size.

To support future empirical testing, this research will use a mixed-method approach, which is appropriate given that AI awareness remains an under-defined construct. Qualitative interviews with AI experts will be used to clarify and refine the construct of AI awareness, informing quantitative surveys administered to small retail business owners to test the proposed effects of strategic agility.