Harnessing Artificial Intelligence for Green Innovation in the Oil Industry: The Mediating Role of Knowledge Management

Abstract

In light of growing environmental concerns and sustainability imperatives, green innovation (GI) has become a strategic priority for industries worldwide. This study investigates the role of artificial intelligence (AI) in enhancing green innovation—both proactive (PGI) and reactive (RGI)—through the mediating mechanisms of knowledge management (KM) processes, namely knowledge generation (Kg), knowledge storage and sharing (KSS), and knowledge application (Ka). Grounded in knowledge-based and resource-based theories, the study examines data collected from 572 engineers working across Iraq’s three largest state-owned oil companies. Using Partial Least Squares Structural Equation Modelling (PLS-SEM), the results confirm that AI significantly enhances both PGI and RGI. Furthermore, KM processes mediate the relationship between AI and GI, with knowledge application showing the strongest mediating effect. The findings provide robust empirical support for the integrative role of KM in translating AI capabilities into environmentally sustainable innovation. Within the context of the Iraqi oil sector—a resource-dependent and environmentally sensitive industry operating in a developing economy—the study highlights how digital transformation, if strategically managed through KM practices, can foster sustainability without compromising operational performance. Theoretically, this research extends the understanding of AI-GI linkages by embedding KM as a central mediating mechanism. Practically, it offers actionable insights for energy sector leaders and policymakers in developing countries on how to leverage AI not only for efficiency gains but also for advancing environmental objectives through effective knowledge mobilisation.