Artificial Intelligence as a Transformer of Dynamic Capability: The Potential and Illusion of Strategic Agility

Abstract

This paper examines the dual role of artificial intelligence (AI) as both a transformer and a corruptor of dynamic capability processes. Drawing on Teece's (2007) framework of sensing, seizing, and reconfiguring, we argue that AI fundamentally reshapes how organizations execute strategic processes — not merely accelerating them, but altering who can act, how quickly, and with what degree of rigor. While AI reduces technical barriers in seizing, alleviates cognitive burden in sensing, and lowers resistance in reconfiguring, the same ease generates a new form of failure: AI-induced performative agility, a condition where organizations appear agile while their agility rests on superficial foundations. We trace this illusion across all three processes: epistemic overconfidence in sensing, accelerated but misguided decisions in seizing, and legitimacy-cloaked but shallow implementations in reconfiguring. The paper contributes to the literature by identifying the mechanisms through which AI-generated outputs — always appearing legitimate — can mask strategic dysfunction, and by proposing that organizational learning culture and institutional maturity serve as critical moderators determining whether AI-augmented dynamic capability becomes substantive or merely performative.