Artificial intelligence in the informal economy: game changer for microentrepreneurs?

Purpose: This paper integrates insights from bricolage theory and dynamic capability framework to explore the potentialities and dangers of artificial intelligence (AI) in the informal sector, where microenterprises could harness its powers to transform their business models and scale, or risk falling further behind in the wake of AI-enabled disruption. Methodology/approach: This paper takes a conceptual approach complemented with case illustrations. In the first part, it draws on bricolage and dynamic capabilities theories to introduce nine new propositions that explicate the dynamic, sometimes bidirectional, relationships, between AI, digital bricolage, dynamic capabilities and enterprise growth and competitiveness. In the second part, it highlights three illustrative cases of microenterprises to further elucidate these relationships. Findings: This study proposes a novel framework integrating AI, digital bricolage, and dynamic capabilities (DC) to enhance the performance of informal microenterprises. It highlights the role of digital bricolage as a mechanism for adapting existing resources to develop AI capabilities, and the complementary role of DC in deploying AI for growth, scaling and competitiveness. The study demonstrates AI's role in strengthening opportunity sensing, seizing, and transformative capacities that differentiate struggling enterprises from thriving ones, while also addressing critical limitations such as infrastructural inequities and fragmented skills. Original contribution: This study proposes a novel framework integrating AI, digital bricolage, and dynamic capabilities (DC) to explicate the mechanisms and processes through which informal microenterprises achieve differential outcomes that propel some microenterprises to growth and scaling, on the one hand; while leaving others to fall further behind. To the best of our knowledge, this is the first paper that aims to unpack the double-edged sword of AI as both a potential leveller and stratifier in the informal sector. Practical implications: The study offers valuable practical implications for fostering inclusive digital transformation in informal microenterprises. It highlights the role of digital bricolage in enabling resource-constrained entrepreneurs to creatively adapt and deploy AI for value creation, operational efficiency, and agility. Policymakers and practitioners can leverage these insights to address barriers such as infrastructural inequities and skill gaps, fostering AI adoption. This approach supports sustainable competitiveness and market integration for marginalised enterprises.