The Impact of Internet Access on Innovation and Entrepreneurship in Africa

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Mobile Internet Adoption and Inclusive Structural Change: Evidence from Nigerian Non-Farming Enterprises

“…Results indicate that the positive effect of internet adoption on sales per worker is statistically significant only in trade activities (Table 7, column 9). These results are consistent with Houngbonon et al (2022), who suggest that the concentration of benefits in trade services could be due to lower operating costs in the sector.…”

“…The insignificant effect of mobile internet adoption on firm entry contrasts with the evidence presented by Houngbonon et al (2022) who document increased firm entry resulting from the diffusion of land line internet: however their focus is on formal firms.…”

“…Other possible effects of internet access on inclusionary/exclusionary outcomes are the creation of business opportunities in new sectors, or the lowering of entry costs in existing ones. There is evidence that living in areas connected to broadband internet fixed lines has favoured the entry of firms in African countries, both formal (Hjort and Poulsen, 2019) and informal ones, although the latter mainly in the service sector, where operating costs are lower (Houngbonon et al, 2022). Moreover, the diffusion of fast mobile internet in Tanzania has allowed highly skilled women to leave farming to take up self-employment activities (Bahia et al, 2021).…”

“…First, there is little evidence of the effect of broadband internet on the performance of informal non-farming enterprises, which is where most of the population of SSA work. Houngbonon et al (2022) found that, across African countries, the diffusion of fast land line internet increases the entry of non-farming household enterprises. However, to the best of our knowledge, there is no evidence on the impact of the internet on two major aspects of structural change, those of productivity growth and sectoral composition, in contexts where informality is prevalent over other forms of economic activity.…”

“…On the one hand, there is evidence that access to fast internet in sub-Saharan Africa has had a positive effect on employment (Hjort and Poulsen, 2019;Bahia et al, 2020Bahia et al, , 2021Caldarola et al, 2022), labour productivity growth (Hjort and Poulsen, 2019;Hjort and Tian, 2021), and firm entry (especially in the service sector), due to lower operation costs (Houngbonon et al, 2022). On the other hand, it has been acknowledged that digitalisation may lead to the concentration of benefits in larger firms, excluding smaller players (Altenburg et al, 2021), and that digital technologies can be labour saving or skill-biased technologies, favouring skilled workers over unskilled ones (Autor et al, 2003;Buera et al, 2021).…”