Business digital divide
Business digital divide
Recent publications indicate that the largest digital divides that can be observed among Latin American organisations are in activities directly linked to the production process. While no major gaps are identified in basic indicators such as internet access and the use of e-banking, there are differences in terms of the inclusion of the internet in supply chains and sales through digital channels. Compared to OECD countries, only 18% of firms have deployed digital sales channels in Latin America (ECLAC 2021).
Of course, there are organisations that take full advantage of the benefits of the digitalisation of productive processes such as e-commerce platforms, logistics and financial services, which have generated 22 unicorn companies in the region (start-ups whose market value is greater than 1 billion dollars).
This phenomenon can also be seen in the growth of Venture Capital investments in the region, which achieved a historical average growth of 50% per year between 2011 and 2019 (ECLAC 2021); and represent strong "injections" of capital for emerging projects with great potential for the creation of value (returns) and, in turn, a lot of risk.
However, although the level of connectivity in the region is relatively high among organisations, regardless of whether we are talking about SMEs or large companies, the gap is evident when looking at the distribution in quality of connection, both locally and internationally.
It is clear that large companies have, in proportion, a connection speed of more than 30 mbps compared to SMEs (ECLAC 2021), most of which operate below this threshold. This gap is highly relevant for value creation, as it constitutes an obstacle to the development of organisations due to the fact that certain uses or applications require high levels of speed (such as cloud computing). At the aggregate level, we can observe in Figure 2 that connectivity is widespread among Latin American organisations but mostly through low speed connections compared to advanced economies, where approximately 90% of all companies (Op.cit), regardless of their size, operate with high speed internet (see cases of Spain - Germany).
The same gap is observed in the "representativeness" of the firm in the digital environment: around 50% of small firms do not have a website (Op.cit). Although this could be understood as a lack of scale or business volume to justify it, it is undoubtedly an impediment for potential clients to get to know the organisation, obtain offers and establish commercial relations with it. It is possible to state that large companies have a level of website adoption similar to that of advanced countries, while small companies have a lower level than those observed in other regions.
To better exemplify this phenomenon, we took data from a survey containing a sample of 7000 companies from various sectors of the Brazilian economy (Op.cit), to observe the advanced uses of the internet in companies with an IT department and the use of the latest technologies. The data confirms the trend: larger companies (probably with greater access to talent in the labour market) may make more extensive use of available technology and more advanced use of the internet.
Sources for this article:
- M. Dini, N. Gligo and A. Patiño, "Transformación digital de las mipymes: elementos para el diseño de políticas", Project Documents (LC/TS.2021/99), Santiago, Economic Commission for Latin America and the Caribbean (ECLAC), 2021.
- Economic Commission for Latin America and the Caribbean (ECLAC), "Datos y hechos sobre la transformación digital", Project documents (LC/TS.2021/20), Santiago, Economic Commission for Latin America and the Caribbean (ECLAC), 2021.