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The effects of digital transformation on innovation and productivity: Firm-level evidence of South African manufacturing micro and small enterprises

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  • Gaglio, Cyrielle
  • Kraemer-Mbula, Erika
  • Lorenz, Edward

Abstract

This paper studies the relationships among the use of digital communication technologies, innovation performance and productivity, using an extended version of the Crepon-Duguet-Mairesse (1998) model, for a sample of micro and small enterprises (MSEs) in a middle-income country, South Africa. Based on the results of an original survey carried out in 2019, we investigate these links for a sample of 711 manufacturing MSEs located in Johannesburg. We estimate the relationships sequentially, firstly estimating the relationship between digitalization and innovation, and secondly the relationship between innovation and productivity. Our results show that selected digital communication technologies including the use of social media and of a business mobile phone for surfing the internet have a positive effect on innovation, and that innovation conditional on the use of these technologies has a positive effect on labor productivity. The findings suggest that public programs aimed at fostering inclusive digitalization must consider the types of digital technologies that are most accessible and beneficial to small firms, including those operating informally.

Suggested Citation

  • Gaglio, Cyrielle & Kraemer-Mbula, Erika & Lorenz, Edward, 2022. "The effects of digital transformation on innovation and productivity: Firm-level evidence of South African manufacturing micro and small enterprises," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    • Handle: RePEc:eee:tefoso:v:182:y:2022:i:c:s0040162522003092
    DOI: 10.1016/j.techfore.2022.121785
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    References listed on IDEAS

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    More about this item

    Keywords

    Digital communication technologies; Product and process innovations; Productivity; Micro and small enterprises; South Africa; Informal economy;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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