Institutional Architectures of AI-Enabled Green Industrial Transformation: Comparative Business Systems Evidence from Germany and the Republic of Korea

Abstract

This article examines how institutional structures shape business transformation, policy implementation, economic performance, and sustainable socio-economic development in AI-enabled green industrial transition. Using a comparative case study of Germany and the Republic of Korea, the study investigates two advanced manufacturing economies that combine high export dependence, strong industrial capabilities, sophisticated innovation systems, and rising exposure to digital, geopolitical, and sustainability pressures. The article argues that technological modernization does not automatically generate competitiveness or sustainability; rather, outcomes depend on the institutional capacity to coordinate firms, finance, skills, regulation, infrastructure, and environmental objectives. Germany represents a coordinated market economy whose Industrie 4.0 and green transition agenda relies on decentralized industrial networks, regulatory standard-setting, Mittelstand capabilities, and social partnership, but faces weaknesses in digital diffusion, investment speed, and administrative complexity. The Republic of Korea represents a strategic developmental innovation system characterized by rapid state-led coordination, semiconductor-centered industrial policy, high corporate R&D intensity, and accelerated AI adoption, but faces structural risks related to conglomerate dominance, SME productivity gaps, energy dependence, and carbon-intensive industrialization. The findings show that sustainable competitiveness emerges when institutional coherence, digital interoperability, innovation finance, and climate-oriented industrial policy are jointly embedded in business systems. The article contributes to comparative business systems, innovation governance, and sustainable industrial policy scholarship by developing propositions on institutional coordination, digital transformation, and resilience-oriented development.