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Firm-level AI adoption is measured by constructing a three-dimensional attention, application and absorption index.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Findings<\/jats:title><jats:p>The results indicate that (1) AI adoption has a positive impact on both internal innovation capability and external innovation interaction, (2) AI adoption has dual effects on the education and skill structure of labor in manufacturing enterprises and (3) enterprises with a highly educated and skilled workforce exhibit a stronger influence of AI adoption on innovativeness.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Originality\/value<\/jats:title><jats:p>This research contributes to the academic and practical discourse by unveiling the underlying mechanisms of AI affecting innovation and introducing a new measurement of the AI adoption index. 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