The Impact of Generative AI Use on Employees' Perceptions of Ethical Leadership and Competitive Advantage: The Moderating Roles of Organizational Innovativeness and Regulatory Environment

Generative Artificial Intelligence has the potential to influence organizational strategies and ethical leadership in today's rapidly transforming business landscape. As a socio-technological tool, GenAI plays a crucial role in the digital transformation of businesses, processes, and society, aiming to meet diverse goals from profit-making to economic development. The rapid use of GenAI raises concerns about its impact on employee perceptions of ethical leadership, which can be both positive and negative. This research examines how GenAI use impacts perceptions of ethical leadership and competitive advantage within organizations and further explores how organizational innovativeness and the regulatory environment moderate these relationships. Drawing on survey data from 234 respondents, the study employed a multi-step data-cleaning approach to ensure data quality and utilized Partial Least Squares Structural Equation Modeling for hypothesis testing. Results indicate that GenAI use strongly predicts competitive advantage but does not significantly shape employees’ perceptions of ethical leadership. Interestingly, ethical leadership exhibited a modest yet counterintuitive negative relationship with competitive advantage, hinting at potential trade-offs between ethical considerations and aggressive market positioning. Additionally, the regulatory environment emerged as a significant moderator, amplifying the positive effect of GenAI use on competitive advantage in more regulated settings. In contrast, organizational innovativeness did not meaningfully alter these relationships. By analyzing GenAI’s role in leadership practices, this research aims to enhance understanding of the interplay between GenAI use, ethical leadership, and competitive advantage, contributing to the literature in this field.