Artificial intelligence (AI) has far-reaching implications on not only where and how multinational enterprises (MNEs) create and capture value but also how they impact broader society and the natural environment. This paper theorizes and examines how MNEs’ AI capabilities affect the adoption of climate actions in global supply chains. Drawing on the characteristics of AI as a general purpose technology (GPT), we propose that AI capabilities can be harnessed by MNEs to provide their supply chain factories worldwide with innovative solutions tailored to accommodate the local circumstances and complex challenges faced by these suppliers, thereby enhancing their environmental capabilities to afford climate actions. We further argue that while unleashing the full potential of AI as a GPT requires investments in intangibles, large intangible investments compel MNEs to trade off economic and non-economic goals, thus hindering the allocation of AI capabilities for promoting climate actions in global supply chains. Our arguments are supported by strong evidence derived from a unique dataset of AI-related patents which we integrate with a proprietary database on the climate actions of 203 global brands across 19 countries in Chinese supply chains. Our findings offer important implications for international business and management theory.
