Governing Artificial Intelligence and Digital Economy for Sustainability: Does Institutional Quality Help or Hinder SDGs Progress Across OECD Countries?

ABSTRACT This study investigates how artificial intelligence (AI) can support sustainable development strategies in OECD countries, particularly in achieving the United Nations Sustainable Development Goals (SDGs). The study contributes to the literature by investigating the role of AI as a transformative enabler of sustainable business strategies across varying institutional quality conditions. Employing quantile regression and two‐stage least squares (2SLS) techniques, this study examines the environmental and strategic implications of three AI dimensions: research and development, market advantage, and infrastructure. The findings reveal that all three dimensions of AI have a positive influence on SDG outcomes. However, the moderating role of institutional quality proved complex and dimension‐specific, sometimes enhancing and at other times constraining AI's effectiveness. These findings underscore the importance for OECD countries of adopting governance‐sensitive, innovation‐driven strategies to leverage AI in support of environmental sustainability. The study offers policy‐relevant recommendations for aligning AI deployment with sustainable development objectives.