Artificial Intelligence Adoption and Strategic Decision-Making: Study of Small and Medium Enterprises (SMEs) in Tokyo, Japan
Abstract
Artificial Intelligence (AI) adoption is gradually reshaping strategic decision-making among small and medium enterprises (SMEs) in Tokyo, where businesses are increasingly using AI tools for tasks such as customer management, inventory control, and operational planning. Despite clear benefits like improved efficiency and responsiveness to market changes, many SMEs face challenges including high implementation costs, limited expertise, and organizational resistance. AI is emerging as a strategic necessity for Tokyo’s SMEs, offering those who embrace it a stronger competitive edge in Japan’s evolving digital economy. The research found that about 23% of Tokyo SMEs have adopted AI, with manufacturing and retail sectors showing the highest uptake, while service industries remain slow adopters. Firms that invested in leadership-driven initiatives, staff training, and strategic partnerships reported faster decision-making, higher efficiency, and better market responsiveness. The study also revealed that barriers such as high costs, limited AI expertise, and cultural resistance significantly slowed adoption, particularly among smaller and family-owned businesses. The study concluded that while AI adoption among Tokyo SMEs is still limited, it has already proven to enhance decision-making speed, accuracy, and competitiveness for firms that integrate it into their strategic processes. For long-term success, SMEs should treat AI as a continuous capability development initiative, supported by leadership commitment, organizational learning, and policy incentives. The study recommended that Tokyo SMEs adopt phased AI implementation supported by leadership commitment, targeted employee training, and strategic partnerships to overcome financial and technical barriers. Policymakers should expand incentives, strengthen digital infrastructure, and promote knowledge-sharing platforms to accelerate adoption and ensure SMEs remain competitive in the digital economy.
Keywords: Artificial Intelligence, Decision-Making, Small and Medium Enterprises, Japan
References
Aljohani, N. B., & Albliwi, S. (2022). Impacts of applying artificial intelligence on decision-making quality: A descriptive study in Saudi arabian private sector organizations. International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies, 13(5), 1-14.
Cooper, R. G. (2025). SMEs' use of AI for new product development: Adoption rates by application and readiness-to-adopt. Industrial Marketing Management, 126, 159-167.
Csaszar, F. A., Ketkar, H., & Kim, H. (2024). Artificial intelligence and strategic decision-making: Evidence from entrepreneurs and investors. Strategy Science, 9(4), 322-345.
Das, A. C. (2025). The Impact of Artificial Intelligence on Strategic Decision-Making in Business: A Review with Focus on India. IJSAT-International Journal on Science and Technology, 16(3).
Dirksen, N., & Takahashi, S. (2020). Artificial intelligence in Japan 2020. Actors, Market, Opportunities and Digital Solutions in a Newly Transformed World. Netherlands Enterprise Agency.
Fukuda, K. (2020). Science, technology and innovation ecosystem transformation toward society 5.0. International journal of production economics, 220, 107460.
Hu, H. A., Tseng, H. T., Mou, J., & Kim, J. (2023). From adoption to adaptation: Bridging digital transformation and AI integration in contemporary SMEs.
Kumar, M., Raut, R. D., Mangla, S. K., Ferraris, A., & Choubey, V. K. (2024). The adoption of artificial intelligence powered workforce management for effective revenue growth of micro, small, and medium scale enterprises (MSMEs). Production Planning & Control, 35(13), 1639-1655.
Liyanaarachchi, A., & Lama Hewage, I. A. (2024). Artificial Intelligence (AI) Adoption on Customer Engagement: A qualitative study on fast-food SMEs.
Lolo, F. (2025). Firm maturity, AI adoption, and financial performance: a study of publicly listed service firms in Finland.
López-Solís, O., Luzuriaga-Jaramillo, A., Bedoya-Jara, M., Naranjo-Santamaría, J., Bonilla-Jurado, D., & Acosta-Vargas, P. (2025). Effect of generative artificial intelligence on strategic decision-making in entrepreneurial business initiatives: A systematic literature review. Administrative Sciences, 15(2), 66.
Marimira, N., & Gumel, B. I. (2025). The Role of Artificial Intelligence in Strategic Decision-Making. Asian Journal of Economics, Business and Accounting, 25(3), 316-327.
Michael, O. (2025). Maximising the Potentials of Small and Medium Scale Business Enterprises in Developing Nations Through the Use of Artificial Intelligence: AI Adoption by SMEs in the Developing Nations. In The Future of Small Business in Industry 5.0 (pp. 215-246). IGI Global Scientific Publishing.
Muminova, E., Ashurov, M., Akhunova, S., & Turgunov, M. (2024, April). AI in small and medium enterprises: Assessing the barriers, benefits, and socioeconomic impacts. In 2024 International Conference on Knowledge Engineering and Communication Systems (ICKECS) (Vol. 1, pp. 1-6). IEEE.
Nassar, H., Goyal, S. B., Albdiwy, F. F., Lasi, M. B. A., & binti Ahmad, N. (2024). Advancing Artificial Intelligence Adoption and Decision-making with Extended Technology Acceptance Model.
Ojeda, A. M., Valera, J. B., & Diaz, O. (2025). Artificial Intelligence of Big Data for Analysis in Organizational Decision-Making. Global Journal of Flexible Systems Management, 1-13.
Rahate, V., Band, G., Naidu, K., Kaluvala, V., Verma, S., & Malik, M. M. U. D. (2025). The Impact of Artificial Intelligence on Strategic Decision-Making in Corporations. Metallurgical and Materials Engineering, 31(1), 811-816.
Sánchez, E., Calderón, R., & Herrera, F. (2025). Artificial Intelligence Adoption in SMEs: Survey Based on TOE–DOI Framework, Primary Methodology and Challenges. Applied Sciences, 15(12), 6465.
Seppänen, S. (2025). Digital transformation in SMEs: drivers, challenges, and the impact of emerging technologies on decision-making and management control.
Shemshaki, M. (2024). The Benefits of Using Artificial Intelligence for Business Success Strategies for Innovation, Efficiency, and Growth. Milad Shemshaki.
Tavos, F. (2024). Survive and Thrive in the Digital Age: A Growth Study of Digital Transformation in Japan's Small and Medium-Sized Enterprises (SMEs).
Zein, Afrizal. (2025). Artificial Intelligence in Strategic Decision Making. International Journal of Social Sciences. 1. 17-25. 10.51805/ijss.v1i1.311.
