The Impact of Artificial Intelligence on the Formation of Commercial Contracts: The Mediating Role of Governance in the Kingdom of Saudi Arabia

Abstract

Artificial Intelligence (AI) has emerged as a transformative force reshaping governance and decision-making in modern organizations. Within the context of Saudi Arabia’s Vision 2030, startups are increasingly adopting AI to enhance the efficiency, accuracy, and transparency of commercial contract formation. This study examines the effect of AI capabilities on contract formation, emphasizing the mediating role of governance in ensuring accountability and ethical compliance. A quantitative approach using Partial Least Squares Structural Equation Modeling (PLS-SEM) was applied to analyze data collected from Saudi startups. The results reveal that AI capabilities significantly improve contract formation and governance performance, while governance exerts a strong mediating effect between AI and contractual outcomes. These findings demonstrate that the integration of AI within robust governance frameworks enhances operational efficiency, promotes institutional integrity, and supports sustainable digital transformation. The study concludes that governance serves as the essential mechanism through which AI capabilities are translated into transparent and reliable organizational practices, reinforcing the strategic alignment between innovation, ethics, and performance in Saudi startups.