Digital Transformation of Microenterprises in South Korea: Fostering E-commerce Adoption for Growth

Technological advances change the industrial environment. Due to the development of digital technology, different markets are connected in real time and information and data travels over physical boundaries of markets. On top of that, the COVID-19 pandemic accelerated the pace of the digital economy’s expansion. In the highly online paradigm that emerged in the pandemic’s wake, digital technology enabled firms to adopt new ways of providing goods and services. Digital transformation has since progressed rapidly across all industries. Firms now view the digital transformation not as an option, but as a prerequisite to doing business. Digital transformation creates many opportunities for microenterprises. For one, it enables them to embrace opportunities to expand their markets and create new business models. Online storefronts and digital advertising, for example, are stepping stones to accessing the global market, and modern firms sell products utilizing diverse platforms. In this process, firms are able to gain a customer base and improve efficiency. However, microenterprises still lag in terms of digital transformation in almost all areas, and we know little about how they are adapting to the digital transformation. Most microenterprises face difficulties dealing with technological barriers and high initial costs and often lack necessary digital skills. Moreover, microenterprises often fail to understand the benefits of digital transformation and are slow to invest in digital transformation and adopt digital technologies. Furthermore, the current status of digital transformation among microenterprises is not being properly monitored as OECD (2021) pointed to a substantial lack of data and analyses on digital uptake by micro-firms. In this article, I examine the importance of microenterprises in the South Korean economy and analyze some of challenges they face in their pursuit of digital transformation. I then describe some of the implications carried for microenterprise policy. Finally, I briefly examine the current status of digital transformation among microenterprises, focusing on the adoption of e-commerce technology.