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Digitalization and the performance of micro and small enterprises in Yogyakarta, Indonesia

Author

Listed:
  • Anna T. Falentina
  • Budy P. Resosudarmo
  • Danang Darmawan
  • Eny Sulistyaningrum

Abstract

The world is going digital. Little is known about how this digitalization affects the performance of micro and small enterprises, one of the major foundations of the economy in developing countries but with relatively low productivity. This paper examines the causal impact of internet utilization, as a part of digitalization, on enterprise performance. We conducted a field survey among micro and small enterprises in Yogyakarta, the densest micro and small enterprise population province in Indonesia. The identification strategy exploits the fact that the differences in geographic topography produce conceivably exogenous variations in the strength of cellular signal that micro and small enterprises in various areas can receive to connect to the internet. We find that internet utilization has enabled micro and small enterprises to engage in the digital economy and has improved labor productivity and exports.

Suggested Citation

  • Anna T. Falentina & Budy P. Resosudarmo & Danang Darmawan & Eny Sulistyaningrum, 2019. "Digitalization and the performance of micro and small enterprises in Yogyakarta, Indonesia," Departmental Working Papers 2019-08, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2019-08
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    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2019-06/acde_falentina_et_al_2019_7_digitalization_sme_indonesia.pdf
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    More about this item

    Keywords

    digital technology; internet; micro and small enterprises; productivity; exports;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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