The adoption of Business Intelligence Systems (BIS) is critical for enhancing the competitiveness and operational efficiency of Small and Medium-sized Enterprises (SMEs). However, in resource-constrained environments like Malaysia, BIS adoption presents notable challenges. This study explores how Malaysian SMEs navigate these obstacles through Innovative Behavior (IB), with a focus on the mediating role of Competitive Intelligence (CI) and the moderating effect of Innovative Dynamism (ID). Using Structural Equation Modeling (SEM) and Partial Least Squares (PLS) via SmartPLS4, data were analyzed to examine the complex interplay between IB, CI, ID, and BIS adoption. Unexpectedly, results reveal a negative direct relationship between IB and BIS adoption, suggesting that while innovation is often encouraged, it may complicate or delay BIS implementation. However, CI positively mediates this relationship, indicating that strategic use of competitive insights can align innovation with BIS adoption. Conversely, ID negatively moderates the relationship, implying that excessive innovation may destabilize the structured processes required for successful BIS implementation. These findings align with organizational change theory and dynamic capabilities theory. While innovation drives adaptability, it must be synchronized with existing capabilities and structures to avoid resistance and misalignment. Dynamic capabilities theory further suggests that a balance between innovation and operational stability is key to successful technological adoption. This study contributes to both academic literature and practical knowledge by highlighting the nuanced role of innovation in BIS adoption. For policymakers and SME leaders, the findings underscore the importance of channeling innovative efforts through competitive intelligence while avoiding overemphasis on continuous change. A balanced, strategically aligned innovation approach is essential for fostering a conducive environment for BIS adoption in Malaysian SMEs.
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