Differential impact of ICT on MSMEs' productivity in Africa’s emerging market

Abstract

AbstractThe observed low level of information and communication technology (ICT) usage among micro, small, and medium-sized enterprise (MSME) firms in many African countries may serve as a major constraint to their productivity. The productivity of service and manufacturing firms is impacted differently due to this low uptake of ICT. This paper seeks to examine the differential effects of ICT on MSMEs’ productivity in emerging African economies, specifically Egypt and Nigeria. This study evaluates the effects of ICT on MSMEs’ productivity across different sectors (services and manufacturing), by size and aggregated. The estimated results support the positive impact of MSMEs’ website presence and use of email on their productivity, though the magnitude varies across different analyses and sectors. This appears to support the differential sectoral impacts of ICT on MSMEs’ productivity across countries in emerging markets. Specifically, this study finds evidence for a higher impact of firms’ website presence on productivity in the manufacturing sector than the services sector across emerging economies. The study, therefore, recommends that emerging markets economies that want to implement appropriate national technology policies to enhance their firms’ productivity should always consider their differential effects on various sectors, as universal ICT policies may not achieve the desired objectives.Keywords: ICTproductivityservicesmanufacturingemerging marketsOLSJEL Classification: D24C81L80L86L96 AcknowledgmentsThe first author acknowledges comments received from the 5th AfricaLics International Research Conference (November 9th–11th, 2022). We thank the Editor and the Reviewers for their helpful comments that have improved the quality of the paper. All other errors should be ascribed to the authors.Disclosure statementNo potential conflict of interest was reported by the authors.Notes1 In this study, productivity is measured as the input-output ratio of firms that is computed as normal distribution stochastic frontier model, while ICT is proxied by the use of websites and e-mail for interfacing with clients/suppliers. Please confirm that the following wording is correct: “normal distribution stochastic frontier model”.2 For instance, in Nigeria, usage of ICT among firms shows that only 17.2% of firms own websites, 6.5% own technology that is licensed by foreign companies, while 22.4% had an email for communicating with customers (World Bank Enterprise Survey).3 According to World Bank Enterprise Survey data, the classification to micro, small, medium and large enterprises firms are based on employment-band criterion with micro firms having 1 to 4, small firms 5 to 19, medium 20 to 99, while large firms have above 100 employees.4 The choice of these two emerging markets is based on availability of recent enterprises survey data.5 We are constrained to exclude the enterprises survey data of South Africa, being the third major emerging market economy in Africa, as the latest available survey data stopped at 2007 and only covered 937 firms. The available survey data for South Africa did not also capture major variables of interest in this study.6 2014 is the latest Enterprise survey available for Nigeria as at the time of undertaking this study.7 Egypt does not have data on firms’ use of email; this study thus rather employed the international recognized quality certification (IRQC)8 This is later reclassified into two main sub-sector (Manufacturing and Services) for analysis purposes – Manufacturing sub-sector contains Food, Garment, Chemical, machinery and equipment, furniture, construction, printing and publishing, non-metallic mineral products and fabricated metal products, while, the services sub-sectors details sectors like Services of Motor Vehicle, Hospitality & Tourism, wholesale, Retail, Transport, Hotels & Restaurants and other services.9 Percentage (%) of general MSMEsAdditional informationFundingThis work was supported by African Economic Research Consortium (AERC): [Grant Number TT19004].