Abstract
The rapid diffusion of generative artificial intelligence (AI) across higher education presents not only pedagogical challenges but also a deeper institutional adaptation problem with implications for future-of-work preparedness. This developmental paper examines AI adoption in higher education as a disruption to capability formation and credential legitimacy, arguing that when technological practices evolve faster than governance and assessment regimes, institutional lag may emerge. Drawing on exploratory mixed-methods data from 55 business and management students at a UK university, the study identifies emerging tensions between institutional frameworks and students’ anticipated professional realities. Students simultaneously recognise AI as professionally relevant, express concern about its impact on their own capability development, and perceive institutional policies as unclear or insufficiently operationalised. These perceptions are interpreted as organisational intelligence signalling misalignment between institutional capability development processes and evolving workplace demands.
The paper theorises these dynamics through institutional theory, technological legitimacy, and human-AI complementarity perspectives. Building on the automation-augmentation paradox, it introduces the concept of capability asymmetry to explain how uneven governance responses to AI diffusion may stratify graduate preparedness. The paper proposes a developmental framework linking three interdependent institutional dimensions: governance coherence, capability development, and credential legitimacy.
The study contributes to organisation and management scholarship in three ways. First, it reframes higher education AI research from a pedagogical integrity problem toward an institutional adaptation challenge. Second, it introduces capability asymmetry as a theoretically relevant consequence of uneven institutional responses to technological disruption. Third, it conceptualises student voice as organisational intelligence that can inform governance and capability architecture redesign. Higher education is positioned as an analytically valuable context for examining institutional adaptation because credential systems render legitimacy tensions particularly visible.
As a developmental contribution, the paper outlines a future research agenda focused on in-depth investigation of institutional adaptation processes under AI diffusion. Examining how governance interventions, assessment redesign, and student AI engagement co-evolve over time offers potential to advance organisational theory on technological disruption, legitimacy reconstruction, and human capital development in rapidly changing environments.