The Impact of Artificial Intelligence on the Performance of Small and Medium Enterprises in Kosovo

This study investigates the impact of Artificial Intelligence (AI) adoption on the performance of small and medium-sized enterprises (SMEs) in Kosovo, a context where firms face resource constraints but play a pivotal role in economic resilience. Using survey data from 210 SMEs and applying correlation and multiple regression analyses, the research explores how AI integration affects internal management processes, strategic adaptability, and overall organizational outcomes. The objectives were to assess the extent to which AI influences human resource management (HRM), decision-making quality, and customer experience, and to identify enabling factors such as digital readiness and employee training. The findings reveal a strong positive relationship between AI adoption and internal performance indicators, particularly HRM efficiency, where AI training emerged as the strongest predictor of improved outcomes. Decision-making quality was also positively associated with AI, albeit more modestly. However, results indicate a negative relationship between AI usage and customer experience, suggesting that current deployments prioritize internal efficiency at the expense of personalized service delivery. The study concludes that while AI can act as a catalyst for productivity and innovation, its benefits in customer-facing functions remain underutilized. These insights highlight the importance of aligning technological investment with workforce upskilling and customer-centric strategies. The paper contributes to the broader discourse on digital transformation in developing economies by offering recommendations for SME leaders and policymakers to foster inclusive and sustainable AI-driven growth.