Digital Technologies

This chapter addresses the following questions:

■ What are the patterns of digital adoption across firms? ■ How does the supply side of digital business solutions affect technology adoption by firms? To what extent do market concentration and anticompetitive practices by suppliers of digital solutions raise prices, restrict access, or lower quality and innovation in solutions? ■ How much has the COVID-19 shock accelerated digitalization, and what are the risks of an increasing digital gap across firms? ■ What role has the “technology readiness” of firms before the pandemic played in explaining their digital response and firm performance during the COVID-19 shock? Did firms that have been using more digital technologies perform better in terms of curtailing the loss of sales and building sales—that is, were they more resilient? ■ How are firms mitigating climate change and adapting to climate shocks, and how is this related to the overall technological capabilities of the firm?

Digital Technologies

As shown in previous chapters, a large share of firms in developing countries have access to computers, smartphones, and the internet. These general-purpose technologies (GPTs) play an important role as enablers to access digital technologies, but as discussed in chapter 1, many questions remain about the purposes for which firms are using digital technologies and with what intensity. This section focuses on disentangling those purposes and describes the patterns of digitalization within firms. Understanding this process is critical for policy makers when considering digital upgrading programs and more specifically about how to prioritize technologies for support.

Patterns of Digitalization across Firms

The data from the Firm-level Adoption of Technology (FAT) survey show that there are significant gaps across firms in the use of digital technologies, but this gap varies across digital enablers. For example, there is a relatively small gap between large and small firms in their access to the internet or the use of digital platforms that cost little to access (such as social media) (figure 5.1, panels a and b), compared to the likelihood of having their own website (figure 5.1, panel c). Reducing the gap between small and large firms with respect to digital enablers may be a necessary condition for providing better opportunities for businesses in developing countries, but as discussed, it will not be sufficient to guarantee adoption of digital technologies. Therefore, it is important to understand how and for what purposes these businesses are using digital technologies.