["R&D Management, EarlyView. ", "\nABSTRACT\nGenerative artificial intelligence (AI) can transform research and development (R&D) by enhancing efficiency, accelerating product development, and fostering innovation. As companies seek to integrate this technology, understanding the role of organizational readiness and AI literacy as well as generative AI's impact on innovation capacity becomes increasingly important. This study examines whether cultural and structural readiness and AI literacy affect the use of generative AI and how generative AI influences R&D activities and innovation capacity. The study employs a qualitative pre‐study and survey data, analyzed with structural equation modeling. The findings show that cultural readiness, reflecting an organization's openness to AI‐driven change, is a key enabler of successful adoption. Structural readiness, defined by the technological and procedural alignment with AI applications, appears to play a conditional role, depending on the level of employees' AI literacy. The findings also demonstrate that generative AI supports R&D processes and, in turn, enhances innovation capacity. By providing insights into the interplay between organizational readiness, AI literacy, generative AI utilization, and its impact on R&D activities and innovation capacity, this research advances the academic understanding of how generative AI can contribute to innovation processes and provides practical implications for organizations aiming to leverage generative AI for competitive advantage.\n"]