Artificial Intelligence, Value Creation and Adaptation: Does Computational Rationality Complement Bounded Rationality?

Assessments of how managers make decisions about value creation have long assumed that heuristic analysis leads to bounded rationality and self-satisficing. However, artificial intelligence draws on computational rationality to access and process limitless real-time data, increasing optimization in decisions on value creation and adaptation. We examine how AI assists MNEs to create and adapt value in institutionally [culturally] diverse settings and how computational rationality can impact optimized value creation and bounded rationality. Through in-depth examination of cases using AI systems, workshops on AI-driven firms, and interviews with AI experts, we explore how “condition” and “construction” factors in AI-systems affect AI’s ability to make optimal “rational” and “non-rational” choices on value creation, while optimal value creation in adaptation remains critical in international business. AI influences choices and helps provide an optimal value if “condition” and “construction” factors are considered with due diligence and domain expertise. We argue that AI presents a double-edged sword, influences choices and behavior in a predictable way, and may discriminate if constructed imperfectly. It also complements heuristic and bounded rationality and can replace more limited approaches to learning and decision-making. We contribute to AI-enabled value creation mechanism and inspire studies to revisit bounded-rationality in international business.