AI-Powered Personalization and SME E-Commerce Growth in Emerging European Economies: The Mediating Roles of Consumer Engagement and Digital Trust

Abstract

This study examines the mechanisms through which artificial intelligence-enabled personalization technologies influence small and medium-sized enterprise (SME) e-commerce performance in emerging European economies. While existing research has predominantly focused on large firms in advanced economies, limited evidence exists regarding how AI personalization drives growth for resource-constrained SMEs operating in less digitally mature environments. Drawing on resource-based view, technology-organization-environment framework, and consumer engagement theory, this research develops and empirically tests a moderated mediation model using survey data from 487 SMEs across eight Eastern and Southern European countries, supplemented with Eurostat macroeconomic indicators. The results reveal that AI personalization adoption positively affects customer engagement, which in turn enhances e-commerce performance metrics including sales growth, conversion rates, customer retention, and revenue growth. Critically, customer engagement fully mediates the relationship between AI personalization and e-commerce performance, while digital trust significantly moderates the engagement-performance link. Multi-group analysis demonstrates substantial cross-country heterogeneity, with Northern European SMEs exhibiting stronger direct effects and Southern European firms showing greater reliance on trust-mediated pathways. These findings extend AI adoption theory by integrating engagement and trust mechanisms, provide empirical evidence from underrepresented SME contexts, and offer actionable policy recommendations for digital transformation strategies in emerging economies, with specific attention to countries like Iran facing unique institutional and infrastructural challenges.