Has the internet fostered inclusive innovation in the developing world?

Caroline Paunov & Valentina Rollo


Based on 50,013 firm observations covering 117 developing and emerging countries, this paper shows knowledge spillover effects from industries' use of the internet boosted the average firm's productivity and innovation performance. We document that industries' "digitization" had heterogeneous impacts: results from quantile regressions indicate that the most productive firms benefited much more than others. Wider Internet adoption rates were also of larger benefit to single-plant establishments, non-exporters and firms in remote locations, particularly to the most productive among these firms. Overall, we document that the internet can play an important role to support inclusive innovation, conditional on firms' "absorptive" capacities.

Keywords: Information and communication technologies (ICTs), internet, innovation, productivity, firm heterogeneities, informal businesses, developing countries

JEL Classification: O33, O14, O12, D22, L6, L8