practices by suppliers of digital solutions (such as collusion and abuse of dominance) that can raise prices, restrict access, or lower quality and innovation in solutions. Exclusionary abuse of dominance can also restrict potential competitors in supply-side markets from entering or expanding and thus limit innovation in products provided. A database compiled recently by the World Bank found more than 100 finalized antitrust cases involving digital platforms. Nearly 40 percent of those are in developing countries. Meanwhile, antitrust scrutiny in other digital markets is steadily increasing. For instance, the European Commission is currently investigating SAP over allegedly abusing its dominance in the ERP market by preventing users from switching to other vendors or connecting to competitors’ applications. Further research is needed on the question of how these supply-side market dynamics affect technology adoption by firms. In some cases, pricing of digital technologies may play a lesser role in firms’ adoption compared to other types of inputs because a number of digital solutions are provided at no cost or at a low price to the user, and free open-source solutions are readily available. After digital technologies provided by Google and Microsoft, the next most popular choice for digital technologies overall are open-source systems (such as WordPress, PHP, and Apache). Together they provide 14 percent of all technologies in Sub-Saharan Africa, and 11 percent to 12 percent in other regions. Smaller firms are more likely than their larger counterparts to use these open-source technologies. The share of Apache and PHP (Hypertext Preprocessor) used by small firms is twice the share used by large firms. At the same time, it is possible that even if market power does not result in higher prices it may manifest in a lack of incentives to develop products targeted to smaller firms, developing countries, or niche markets.
Technology and Resilience Technology is central to resilience to different shocks. Previous findings suggest that firms with more diversified technologies are less subject to the impact of shocks such as natural disasters (Hsu et al. 2018) or overall external shocks (Koren and Tenreyro 2013). The COVID-19 pandemic put those findings to the test. The discussion that follows uses granular data from both the FAT survey and the World Bank Business Pulse Survey (BPS) to investigate the role that digital technologies, in particular, can play in helping firms weather shocks.7 The discussion examines the role of digital readiness—whether firms that used more sophisticated digital tools before a shock fare better during and after a shock. In the case of the COVID-19 pandemic, firms with a high level of digital readiness performed better, regardless of the extent and type of their digital response during the pandemic. This finding also has implications for firms’ adjustment to climate change. Firms’ adoption of green technologies to adapt to and mitigate climate change is examined at the end of this section. 120
Bridging the Technological Divide
