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Digital Enterprise

From Silicon Valley to Silicon Savannah? Tech Hubs in the Global South

by Yingqin Zheng & Andrea Jimenez Cisneros

For decades, as an ICT4D intervention, telecentres have been built across many regions in the global south, with the aim to bridge the digital divide and bring socio-economic benefits to local communities. The result is mixed to say the least. Many telecentres were not sustainable due to a number of reasons.

In recent years an upgraded and “sexier” version of telecentres, tech hubs, have been rapidly diffusing in the global south. In 2018, GSMA reported 442 tech hubs in Africa and 565 in Asia Pacific (Giuliani 2018).  They are spaces that not only provide co-working space and Internet connection, but also claim to foster collaboration, entrepreneurship and innovation. This is a model that seems to have stemmed from industrialised regions and diffused to developing countries, as part of the digital and mobile boom, and promise to produce ‘local innovations by local people’ (Afrilabs). GIZ’s 2013 report describes this movement as “from Silicon Valley to Silicon Savannah”, indicating the high expectation projected to Tech Hubs to boost innovation and economic growth.

Zheng Tech Hubs

Source: Giuliani (2018)

Many hubs are designed to mirror their Western counterparts. iHub in Kenya, one of the oldest and most prominent hubs in Africa got the inspiration from “successful co-working spaces across the world”, and “the team went to work transforming the sterile office block into an interactive hive. They threw bright green paint on the walls, installed a snappy Internet connection, and imported a slick Italian espresso machine” (Sanderson 2015, p.6).

Although there is plenty of research in organisational studies that argues materiality of physical space shapes human behaviour and organisational practices, our research which compares a Tech Hub in central London with one in Lusaka (Jimenez & Zheng 2016, 2017) shows that the physical design of the hub may not be directly related to how the space is used by the members and what value is generated from it. Members in the London hub, a global chain boasting extensive networks of entrepreneurs, greatly appreciate the aesthetics and design of the hub as a co-working space, but there is limited sense of a collaborative work.  As one member stated: “[f]or shared workspace I think it’s a great place, apart from the intention of trying to get people to collaborate which I don’t think it happens that much.” It was found that despite the open design of the space, strict rules are applied on how segments of the space are used thereby imposing a structured, disciplined order in the Hub.

In contrast, the Lusaka hub, while at the time not being able to afford to become a franchise of the London hub, is located in a standard office space with compartmentalised rooms and rigid walls. Yet there is a higher level of interaction and collaboration among members, improvisation and serendipity in their activities, and a stronger sense of community and identity. One member commented:

 “So you find people around here could really help you. If I ask him how do I go about with this because sometimes I am stuck, people come and help me.

Nevertheless, while the Lusaka hub had an innovative and learning culture and clearly was highly valued by local entrepreneurs, it struggled to show evidence of market-based innovation success.

In contrast, another study on Tech Hubs in central Manila shows that while it physically resembles the colourful, open design of coworking spaces in the West and provides high speed Internet that is not widely available in the Philippines, the membership fee to use these spaces were not affordable to local entrepreneurs (Tintiangko & Soriano 2018). They therefore become spaces for international expats and local elites, in effect excluding the grassroots entrepreneurs who could benefit from the hubs the most.

So far, we only have some broad ideas of the emerging landscape of Tech Hubs across the globe (Friederici 2018), and limited understanding beyond selective in-depth case studies (Sambuli & Whitt 2017, Haikin 2018, Littlewood & Kimbuyu 2018) of what actually happens in the Tech Hubs, the impact they may have on local community and how they evolve over time. We believe that behind the homogeneous branding of Tech Hubs all over the world as “spaces for innovation”, there are almost certainly heterogeneous modes of enactment of the spaces that give rise to multiple, or limited, values to local communities.

References

Friederici, N. (2018) Grounding the dream of African Innovation Hubs: two cases in Kigali. Journal of Developmental Entrepreneurship, 23(2) https://doi.org/10.1142/S1084946718500127

GIZ (2013) From Silicon Valley to Silicon Savannah, GIZ, Bonn https://10innovations.alumniportal.com/technology-hubs/from-silicon-valley-to-silicon-savannah.html

Giuliani, D. (2018) 1000 tech hubs are powering ecosystems in Asia Pacific and Africa, Mobile for Development (GSMA), 20 Mar https://www.gsma.com/mobilefordevelopment/programme/ecosystem-accelerator/1000-tech-hubs-are-powering-ecosystems-in-asia-pacific-and-africa/

Haikin, M. (2018) Voices of the Silicon Savannah: Key Challenges facing Kenya’s Social-Tech Ecosystem – Views from Within. https://matthaikin.com/2018/10/08/voices-of-the-silicon-savannah-released/

Jimenez, A. & Zheng, Y. (2017) A spatial perspective of innovation and development: innovation hubs in Zambia and the UK. In P. J. Choudrie J., Islam M., Wahid F., Bass J., ed. Information and Communication Technologies for Development. ICT4D 2017. Springer, 12-14.

Jimenez, C. & Zheng, Y. (2016) A capabilities approach to innovation: a case study of a technology and innovation hub in Zambia, paper presented at Twenty-Fourth European Conference on Information Systems (ECIS), Istanbul, 12-15 Jun.

Littlewood, D.C. & Kiyumbu, W.L. (2018) “Hub” organisations in Kenya: What are they? What do they do? And what is their potential?, Technological Forecasting and Social Change, 131, 276–285. https://www.sciencedirect.com/science/article/pii/S0040162517313173

Sanderson, O. (2015) On Hubs, BRCKs, and Boxes:The Emergence of Kenya’s Innovation and Technology Ecosystem, Tufts University, Medford, MA. https://dl.tufts.edu/catalog/tufts:sd.0000269

Sambuli, N. & Whitt, J.P. (2017) Technology Innovation Hubs and Policy Engagement, Making All Voices Count Research Report, IDS, Brighton, UK https://www.makingallvoicescount.org/publication/technology-innovation-hubs-policy-engagement/

Tintiangko, J.T. &  & Soriano, C.R.R. (2018) Coworking spaces in the global South: local articulations and imaginaries, paper presented at 68th Annual International Communication Association Conference, Prague, 24-28 May

Digital Enterprise

Incentivizing Digital Entrepreneurs in India: Policies and Practices

The IT/ITES sector in India has been driven mainly by large vendors in urban areas and most revenue is generated from, in and around, the metropolitan areas of Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune. In recent years both State and Central governments are promoting IT outsourcing for start-ups and other social enterprises by providing seed funding and other incentives for starting IT/BPO/ITES companies away from these metros/cities, in Tier 2 and Tier 3 towns and villages.

Way back in 2009, the State Government of Karnataka, pioneered a rural BPO policy by funding entrepreneurs to set up enterprises in rural areas and provide employment to disadvantaged youth. This policy was said to be an exemplar given its focus on rural outreach and for its effort to bridge the digital divide. The initial strategy was to give subsidy of Rs. 4,000,000 (approx. US$ 60,000) to companies to set up 100-seater units which would employ rural unemployed youth.  However, out of the 31 companies that applied for this programme, only about 13 of the bigger players commenced operations while many smaller players who had received the initial funding could not sustain their operations. A revised rural BPO policy was drafted in 2014 with the aim of supporting smaller social enterprises and NGOs by lowering the criteria for entry.  It was envisaged that entrepreneurs would be permitted to apply to enter the market with a minimum number of 30 seats/employees and would receive a subsidy of Rs. 2,000,000 (approx. US$ 30,000) over a period of three years.  The plan was that this subsidy would be tagged to the number of employees hired measured in terms of Provident Fund[1] contributions made by the rural BPO.

Realities on the Ground

Together with a colleague from the LSE, Dr. Shirin Madon, we conducted a longitudinal study for a period of approximately six years at three such rural BPO centres that were set up with State funding (Madon and Ranjini, 2016). Entrepreneurs whom we met felt that it was an excellent opportunity and that there was immense potential to deliver on par with global standards, so long as some of their problems were addressed by the government. Similarly, employees too were very optimistic about their prospects and growth. As one visually-impaired employee trained in a rural BPO that focusses on differently-abled youth who later went to secure a permanent job in a nationalised bank said:

‘I am very happy to say that it was because of the training at Samarthanam (rural BPO) that I realised that I will be able to work and stand on my own.  Samarthanam not just gave me job training and taught me how to handle customers, but it gave me the confidence that I can do anything and achieve anything’.

A team leader from another rural BPO centre commented:

‘Since Simply Grameen had established its centre in Maddur, for the first time we girls have the possibility of getting employment locally which is culturally acceptable by the household.  I worked in Bangalore before joining here and it was a harsh existence working for an urban BPO both in terms of the high cost of living and because of the lack of a social support network for women’. 

Despite the close proximity of the centre to Bengaluru, attrition rates at another rural BPO had been held constant at 8% per annum.  When probing as to why this was so, the Centre Manager there remarked:

Employees valued the prospect of combining the opportunities they were obtaining from RuralShores with pre-existing household income sources from agriculture.  In particular, employees found that they were less reliant on local money lenders as it became easier to obtain personal loans from banks as a result of their formal employment with RuralShores’.

We analysed the implication of this policy initiative beyond revenue and profit generation or number of people employed. For the young men and women who work here at these BPOs it has had a huge impact on their careers and lives. Many lessons can be learnt from the Karnataka Government’s RBPO policy initiative, although it has been discontinued. Below is a summary of our analysis:

Benefits to Employers and Employees

Reduced operational costs The operational costs like real estate rentals, transportation, and facilities management are substantially lower compared to urban centres. This is an important factor for enterprises to move out of urban localities.
Language Most of the employees have multi-lingual and vernacular language capabilities that is an asset in penetrating regional and rural markets. For example for banks and telecom companies.
Reverse migration Most of the employees prefer to work closer home as it facilitates their involvement in household activities and agriculture
Training Employees value the training they receive in their respective domain as well as training in soft skills and communication.
Formal employment Employees perceive regular income in a firm increases their status in society
Career development Career growth, clear career path and goals is a motivating factor. Opportunity and encouragement to pursue higher and distance education.
Cost of living Since cost of living is comparatively less than urban areas, lesser salary is acceptable
Financial benefits Insurance and Provident Fund benefits. Access to loans from banks
Gains for Women Proximity of employment has enabled women to join workforce, particularly for those who could not migrate to cities. Split shift enables women to balance domestic chores and child care.
Other benefits Study leave, and opportunity to live with family and parents and work-life balance

 Challenges and demands by entrepreneurs

Criteria for entry Some say eligibility requirements for entering into Government schemes is high and cannot be met by small players and rural start-ups.
Developing talent pool and training Although the workforce is engaged and committed, training them on-the-job for specific tasks takes time and huge effort
Attrition Attrition is comparatively low, however, it is still a matter of concern
Electricity Use of generators due to long power cuts increases operational costs. There is a demand that the government should support ongoing expenses through monthly subsidies for electricity.
Connectivity Entrepreneurs demand reduction in tariff for telephone and internet.
Infrastructure Roads, transportation and other basic services indirectly affect the functioning of these centres.
Handholding Initial years is a challenge with limited projects and not so well-trained workforce. Entrepreneurs suggest that the government should consider sub-contracting its own e-governance and related projects to these centres.
Ease of doing business Since many companies failed despite receiving funding, evaluation by government agencies and paper work increased.
Other challenges Availability of skilled labour pool, their retention, sustainability and scalability remain a huge challenge

India BPO Promotion Scheme

While the Karnataka State policy explicitly incentivized setting up of enterprises in backward taluks (rural sub-districts) and for socio-economically and physically disadvantaged groups in order to redress regional imbalances, this central scheme has shifted the focus to more developed taluks and smaller cities. The Government of India’s Ministry of Electronics & Information Technology has recently floated an all-India BPO Promotion Scheme providing incentives for small to medium organisations in both towns and rural areas to commence operations. The scheme provides financial support up to Rs. 1lakh/seat in the form of Viability Gap Funding, with special incentive for units providing employment to women, persons with disability and for units providing employment beyond the target. With a total budget outlay of Rs 493 crores (approximately 70 million USD) the scheme has a target to provide a total of 48,300 seats. As on November 2018, about 45,480 seats have been allocated to different states (Meity.gov.in/IBPS, 2018). Following is the data on number of enterprises that have commenced operations in different States and seats distribution based on population % as per 2011 Census of India.

State Number of Enterprises Number of Seats
Andhra Pradesh 22 5660
Bihar 10 2,110
Chandigarh 1 100
Chattisgarh 2 200
Gujarat 1 500
Himachal Pradesh 3 250
Jammu and Kashmir 7 350
Jharkhand 4 850
Karnataka 5 700
Kerala 1 100
Madhya Pradesh 4 1000
Maharashtra 9 2430
Odisha 13 1601
Puducherry 1 100
Punjab 6 1700
Rajasthan 3 400
Tamil Nadu 23 3600
Telangana 2 400
Uttarakhand 3 300
Uttar Pradesh 9 2480
West Bengal 1 100
Data as on 22 September 2018. Compiled by Ranjini C.R. Source: https://ibps.stpi.in/unitlists.php

Conclusion

Our exploratory study was situated in a single region and now with this pan India scheme there are opportunities for researchers to examine broader themes and conduct comparative analysis.

To conclude, incentivizing BPOs presents an opportunity for peripheral regions to benefit from IT outsourcing activity. However, it is crucial to extend support beyond seed funding such as subsidies and handholding in the initial years. Well established players can also support new entrepreneurs though their CSR activities, mentoring and by sub-contracting work.

(This paper published in Information Systems Journal provides further details about our study.)

References

Madon and Ranjini (2018) Impact Sourcing in India: Trends and Implications, Information Systems Journal, pp 1-16.

Madon and Ranjini (2016) The Rural BPO Sector in India: Encouraging Inclusive Growth Through Entrepreneurship in Nicholson B, Babin R, Lacity M., ed. Socially Responsible Outsourcing. Global Sourcing with Social Impact. Palgrave Macmillan.

Meity.gov.in/IBPS, 2018

[1] This is a term used to mean pension fund

Digital Economy

Challenges and Opportunities of the Digital Economy in Indonesia

This article was originally published in Medium.

Indonesia aims to become the biggest digital economy nation in ASEAN by aiming to reach 130 million US$ of e-commerce transaction in 2020. This may sound ambitious, but the fact that a majority of Indonesians are digitally oriented makes the government strongly believe that the target can be achieved. The latest data from Asosiasi Penyedia Jasa Internet Indonesia (APJII) and We Are Social revealed that there are 143,26 million internet users in Indonesia in 2017, and a majority of them use mobile devices to access the internet. Moreover, the total number of mobile connection has exceeded the Indonesian populations, with each citizen have approximately 2 to 3 SIM cards.

What are the underlying factors that drive this enormous growth? I would argue that there are at least four factors:

  1. Technological advancement particularly in the telecommunication sector. Initially, we can only use a mobile phone for voice call and SMS. These days, both services are not popular anymore as people prefer to use instant messaging and Voice over Internet Protocol (VoIP). This also applies for the handset that we use today, as it becomes smarter and capable of doing a wide range of tasks compared to a classical feature phone.
  2. Increase coverage of a mobile network. There is a fierce competition among operators to become the best in the country through massive infrastructure deployment. As a result, more and more people now have an access to the internet.
  3. Price of ICT is getting cheaper. There is a price war between each operator by lowering the price of internet services in order to maximize network utilization. Also, we can easily find a high-quality smartphone with an affordable price. As a result, telecommunication is not a luxury good anymore.
  4. Social media and instant messaging as “killer apps”. The introduction of Blackberry Messenger (BBM), Facebook and Twitter in Indonesia played a key role in boosting data penetration in the country.

Despite the growing trends of digital in Indonesia, we still face a significant challenge in narrowing the digital divide. Around 77 per cent of internet users are centred in Java and Sumatra, and less than half of citizens in eastern part of the country do not have access to the internet. As a result, Indonesia still lags behind our neighbour countries like Thailand and Malaysia when it comes to global indexes such as Networked Readiness Index (NRI) or GSMA Mobile Connectivity Index.

The digital divide in Indonesia (Source: Open Signal)

The development impact of the digital economy

The aforementioned infrastructure challenges apparently do not hamper the promising growth of the digital economy in Indonesia. At the time of writing, Indonesia has nearly 2,000 start-ups and only behind USA, India, UK and Canada. Interestingly, the majority of those start-ups are led by “millennials” that are passionate to create social impact by harnessing the power of digital technologies. This can be seen from how Nadiem Makarim is successfully growing Go-Jek to empower not only “ojek” drivers but also SMEs and consumers. Go-Pay, mobile wallet system developed by Go-Jek, even contributes in promoting financial inclusion in Indonesia. Another example is evident from how William Tanuwijaya initiates Tokopedia as a platform to enables everyone in starting their own business for free. Both Go-Jek and Tokopedia, together with Traveloka and Bukalapak, are known as start-up unicorn in Indonesia.

So, how does the digital economy contribute to economic growth?

Admittedly, the contribution of the ICT sector to GDP in Indonesia is still not significant with only 7.2 per cent. However, the GDP growth from this sector is the highest compared to other sectors with 10 per cent of GDP growth. In fact, this number is much higher than average GDP growth of Indonesia that only reached 5 per cent.

In other report published by Oxford Economics (2016) revealed that by 2020 every one per cent increase in mobile penetration can contribute in creating additional 640 million US$ to Indonesia’s GDP as well as opening up 10,700 additional job opportunities. Hence, it is no surprise that the government has put significant attention to the digital economy sector.

Speaking of the digital economy, there are at least three emerging trends that are currently happening: on-demand services, financial technology, and e-commerce.

  1. On-demand services. It is impossible to talk about this sector without mentioning Go-Jek, one of the most influential tech start-up in Indonesia. They not only managed to revolutionalize “ojek”, but they also successfully influence behavioural change in our society. Essentially, they facilitate almost everything on-demand, from logistics, food delivery, car wash, and even beauty services. They are now in the process of preparing their own streaming service, which could cement Go-Jek’s position in providing anything that Indonesians need.
  2. Financial technology. There is a clear challenge in bringing financial services to everyone in Indonesia. Only about one in three adults in Indonesia have access to financial services. In this regard, Financial Technology (Fintech) played an important role not only as an enabler for the digital economy but also promoting financial inclusion through technology. This is evident particularly within the case of a peer-to-peer lending platform that enables small business to get access to financial capital. Another example is how the mobile payment serves as a mean to promote a cashless society in Indonesia.
  3. E-commerce. More than 8 million Indonesians loved to shop online, and the numbers are expected to increase in the near future. This is driven by both consumptive and online behaviour of Indonesians as well as the increasing market reach thanks to social media and technology. As a result, many stores are now trying to sell their products through both online and offline channel. People can now buy almost anything easily through their smartphone without having to go to the actual stores, and we can receive our products within hours with the help of instant courier. In the future, we can expect further innovation such as an unmanned store that will transform the way we shop.

Conclusion

Indonesia has a great potential to become the biggest digital economy nation in ASEAN, even in the world. But, achieving this target requires various stakeholders involved to overcome the following challenges:

  1. Narrowing the digital divide. Infrastructure is an important enabler in maximizing the benefit of the digital economy, so the government must ensure that everyone can have an equal access to technology. Palapa Ring project is a great starting point, and the quality of our infrastructure will surely get better by the time the project is finished in 2019. But the infrastructure deployment cannot stop there and should focus on providing access to rural areas in Indonesia.
  2. Digital talent. There is still a mismatch between the supply of university graduates and the demand from tech start-up. This leads to talent war, in which many start-ups have to compete in securing high-quality talents that are lacking in the market. Hence, a collaboration between industry and academia is important to ensure the production of high-quality digital talent that meets the needs of the digital industry.
  3. Regulations. It is no secret that regulations are always behind technological advancement, as can we see from the case of Go-Jek and Grab. What we need is a guiding principle in designing regulations for those emerging technology. It should be designed in such a way that it will not hamper creativity and innovation in tackling societal challenges. Several cybersecurity issues should be taken into account, particularly about consumer protection of personal data.
Digital Economy

Policy to Support Digital Trade & the Digital Economy

This post is written by Christopher Foster and Shamel Azmeh (University of Manchester). It was originally posted on the GEG Africa blog

The global economy is experiencing important technological shifts with the rise of digital technology a key driver. These changes are likely to intensify in the coming years with new technologies that are emerging such as artificial intelligence, cloud computing, and autonomous vehicles.

For developing and emerging economies, the digital economy provides an opportunity to achieve economic and technological catching-up through using digital technologies and building capacities. But, technological shifts may also widen the technological divide with advanced economies weakening the position of developing economies in global value chains and making ongoing catching-up efforts ineffective.

To explore these issues further, we have recently be undertaking research which aims to offer direction in terms of constructing overall policy strategy in developing and emerging economies, in partnership with the Global Economic Governance Africa project, focussing on South Africa.

Policy models for digital

Drawing on our analysis of digital policy, we highlight two important directions that countries have taken around digital policies. This model extends a previous working papers by Bukht & Heeks produced as part of the DIODE project.

Broader liberal strategies for enabling markets for digital trade highlight the importance of developing the national regulation and conditions to maximise diffusion and impacts of digital products and services into the country. This includes, for instance, creating conditions to attract foreign digital firms and ensuring that benefits are evenly distributed by increasing the digital participation of marginalised groups.

On their own, however, market enabling policies might not necessarily produce the desired economic objectives in terms of technology learning and localization. As such, we also consider a more selective approach which we refer to as digital catch-up policy. This second approach is more interventionist and strategic in nature and it requires higher political capital and knowledge in the policy-making process.

As shown below, the two directions are not mutually exclusive and potentially can be complementary.

framework2
Key approaches to digital policy (include specific areas of policy instrument).

The cases of Brazil and Indonesia

To expand and think about implications of such a policy model, we undertook two case studies of Brazil and Indonesia. These studies provide insights for how policy makers can regulate and deal with the challenges of the emerging digital economy.

Overall, directions of digital policy in these two countries have lots in common. Both countries already have core digital regulation and infrastructure in place and policy makers are working to refine policy to ensure that it fits with the rapidly evolving needs of the digital economy and digitalisation.

Moving beyond solely market enabling policies, we see that both countries focus on a number of strategic areas through interventionist policies. Not all of these initiatives have been effective and some carry costs, but in certain areas they have been associated with more vibrant local sectors that are helping build capacities and increase local economic value-added.

The two tables below expand on our findings, highlighting the broad range of instruments being used in the areas of the policy model (click for more details)

Implications for policy makers

South Africa  (and other emerging and developing countries) faces similar challenges in trying to bridge the technological and industrial gap with more advanced economies in a rapidly changing landscape.  At the same time there is a need to ensure that digital policy is inclusive to achieve broader societal outcomes.

A number of policy lessons can be learnt for South Africa from the cases of Brazil and Indonesia. Policies to enable growth in digital trade are important to provide the framework for the expansion of the digital economy. Underlying this, there must be substantive investments in broadband infrastructure and appropriate regulation. An emphasis on inclusion policies will lead to more broad-based benefits from the digital economy.

To support local firms, digital ecosystem policy is a crucial consideration in grounding the benefits of the digital economy. This includes policies to support the growth and scaling-up of start-ups, and the higher participation of MSMEs in digital trade. Furthermore, encouraging global digital firms to localize some of their activities and to build domestic linkages is an important policy objective. As the ‘disbenefits’ of the digital economy become clear, policy makers need to legislate to reduce challenges in areas such as tax, data protection and the platform economy. Reflecting the importance of scale, regional integration is crucial in terms of digital policy. Broader markets, interoperability and national-regional strategic alignments are key to expanding markets, attracting foreign firms, and potentially increasing their commitment to a region.

Digital catch-up policy provides an important direction for supporting digital growth. Our work reveals a broad range of potential catch-up policy instruments in the digital economy (e.g localisation, incentives, and national digital projects). Future examination should explore the specific catch-up policies that could be fruitful in the case of South Africa.

For further information, see two recent GEG policy papers which expand on these issues:

Policy model – Azmeh, S. & Foster, C. (2018) Bridging the Digital Divide And Supporting Increased Digital Trade: Scoping Study, Discussion Paper, GEG Africa, Pretoria, South Africa.
Discussion paper | Policy brief

Case studies of Brazil and Indonesia – Azmeh, S. & Foster, C. (2018) Bridging the Digital Divide And Supporting Increased Digital Trade: Country Case Studies, Discussion Paper, GEG Africa, Pretoria, South Africa.
Discussion paper | Policy brief

Digital Economy

The Developmental Value of Digital Platforms in the Global South

Digital platforms are used in the business models of many of the world’s biggest companies and they impact people across the globe in various ways. A survey conducted in 2015 identified 176 platform companies in the world, with an estimated global market capitalisation of $4.3bn — about the same as Sierra Leone’s gross domestic product. Areas such as employment opportunities, social interactions and transportation are increasingly organised through these platforms. Traditionally, most of the platforms and their main markets have been in the global North, yet companies and people from the global South are also adopting and using digital platforms to run their businesses and daily lives.

This raises important questions on the developmental implications of digital platforms. Recently, valuable research has looked into important areas of digital platforms, such as work conducted within the DIODE Network on digital labour, or on innovation ecosystems of open data platforms. As digital platforms continue to have ever-wider significance, further research is needed. A new DIODE working paper – Digital Platforms in the Global South: Foundations and Research Agenda – suggests that, in order to conduct meaningful research in the area, it is necessary to understand the foundations of digital platforms and the key factors of their functioning, as well as discussing their developmental implications.

Definitions matter: two types of digital platforms

The working paper distinguishes between two main types of digital platforms: transaction and innovation platforms. Transaction platforms, or exchange platforms, facilitate interactions between users by reducing transaction costs. They base their functioning on either direct or indirect network effects, where the former refer to a network (or platform) becoming more valuable to each member as more users join, and the latter to the value created when increasing the base of users in groups that are complementary to each other. Common transaction platforms are M-Pesa, Uber or AirBnB. The second type of digital platforms are innovation platforms, whose distinctive feature is to provide technological building blocks for developers to build services and products on top of them. Common innovation platforms are Android or Apple’s iOS.

DP_typology_blog
Typology of Digital Platforms

A research agenda to study digital platforms in the global South

Building on digital platforms’ typology and how they operate, the working paper puts forward and discusses four different research areas for studying the developmental role of digital platforms in the global South:

  • How to better release the developmental potential of innovation platforms, be that in the form of platform design, development or usage.
  • How digital platforms in the global South differ from the ones in the global North, and what kinds of institutional implications these platforms may have in a developing country context.
  • Do digital transaction platforms exacerbate or help to diminish existing inequalities in the global South?
  • What are the alternatives for current digital platforms, especially in cases when they function less than optimally in enabling development?

All of these areas aim to cover different aspects of digital platforms and development. Overall, digital platforms are likely to have both positive and negative implications for people in different locations of the world, and the impacts may come in various forms and differ from one context to another. Research on the topic is therefore crucial to understand these matters better and to help to steer the creation and functioning of digital platforms towards better developmental outcomes. The working paper provides a foundation for this type of research for scholars and other actors interested in the topic.

Digital Labour

The Continuing Relevance of the State in the Age of Digital Gig Work

Technological change has always had an impact on the sphere of work. Every new form of work that has emerged has been accompanied by optimism about its potential, and concerns about its damaging effects. The same is true of digital gig work – a form of work that can be performed and delivered digitally via online platforms. A primary concern has been the exploitative nature of digital gig work, especially the micro-distribution models in which individuals, as “contractors”, register with the platform to complete their tasks (Meyers et al, 2017). Although being able to work from anywhere, at one’s convenience, on a digital platform may offer certain flexibility, the absence of physically proximate fellow-workers also leads to the atomization of the workforce (Kuek et al, 2015). With the supply of labour exceeding demand, there are questions about the tendency of workers to undercut one another in their eagerness to obtain work, and whether that will lead to a race to the bottom in terms of wages, reduce the bargaining power of digital gig workers and perpetuate socio-spatial disparities (Graham et al, 2017).

Historically, including in the 20th century, states have taken an active developmental role to ensure improvements in labour conditions and in aggregate standards of living. Is it possible for the state to address similar concerns that arise in the context of digital gig work, when technology gives platforms a global reach? This is an urgent question as a 2016 study by the Oxford Internet Institute reveals that a significant share of the gig workforce is in the less affluent regions of the world, primarily undertaking menial and repetitive tasks, while two-thirds of job vacancies are posted by employers from the developed world, including the United States, the United Kingdom, Australia and Canada (Lehdonvirta, 2017).

Such demarcation between the source and destination of work, and the attendant concerns about the digital gig economy, are reminiscent of arguments about the New International Division of Labour (NIDL). NIDL theorists, such as Frobel et al (1980), were concerned with “bloody-Taylorization” following the growth in the offshoring of low-skill, low value-added manufacturing from the 1960s. Yet, for at least four Newly Industrializing Countries (NICs) in East Asia – Singapore, South Korea, Taiwan, and Hong Kong – becoming a part of the NIDL offered a path to technological ‘catch-up’ and ‘late-industrialization’. Those NICs showed how, despite starting off with less-than-desirable work, it is possible to develop indigenous capability to move toward more high-skilled, higher value-added activity. In all these NICs, the dominant institutional force behind the socio-economic transformation was the state.

Amsden and Chu (2003), for instance, point to how Taiwan entered the world semiconductor market by offering low-skill assembly work. Over time, state investments in the education system and technological acquisition, its provision of financial incentives including tariffs and subsidies, and the building of physical infrastructure, created an industry which gave Taiwan a “second-mover advantage” and made the country the world’s leading semiconductor supplier. Specifically, firms pioneered the pure-play foundry, an organizational model in which they became adept at original design and manufacture without necessarily marketing their own brands. Thus, contrary to the fears of the NIDL theorists, the East Asian NICs showed that developing countries have the agency to move beyond exploitative niches in the international division of labour with technological upgrading. More broadly, this highlights that, while concerns about the impact of type and conditions of work on socio-spatial disparities are far from misplaced, there are also institutional means of overcoming these concerns.

The concentration of digital gig work in less affluent countries is largely due to a lack of better local job opportunities. Concerns about the precarious nature of digital gig work are equally true for locally available work in the vast informal sector, with gig work at least offering better monetary returns. But this is not an argument for the status quo. Rather, it is a call to draw from lessons about how institutional means, especially the state, can be deployed to ensure that menial and repetitive digital gig work becomes a stepping stone to more rewarding work and not the only choice arising out of a lack of other options.

One possible initiative by the state is to build, or assist private players in building platforms for local needs which can find global use. With such platforms within its jurisdiction, the state can regulate them to ensure adherence to socially acceptable norms of pay and work conditions. Local language platforms could be encouraged to ensure that digital gig work opportunities are available to a larger section of the population. To undertake such initiatives, the state must minimally promote what the East Asian NICs did so effectively to overcome the debilitating aspects of 20th century manufacturing – investment in education (to ensure employability) and physical infrastructure, financial incentives, and opportunities for ‘learning by doing’. Since current technology and global conditions differ from what they were 50 years ago, the specifics of state interventions will vary. But history suggests the state can play a useful role in harnessing the potential of digital gig work for social transformation. These trajectories and trends are explored at length by the author in a paper being written for the DIODE working paper series.

References
Amsden, A. and Chu, W-w. 2003. Beyond Late Industrialization: Taiwan’s Upgrading Policies. Cambridge, MA: MIT Press

Frobel, F, J. Heinrichs, and O. Kreye. 1980. The New International Division of Labor: Structural Unemployment in Industrialised Countries and Industrialisation in Developing Countries. Cambridge, UK: Cambridge University Press.

Graham, M., V. Lehdonvirta, A. Wood, H. Barnard, I. Hjorth, and D. P. Simon. 2017. The Risks and Rewards of Online Gig Work At The Global Margins. https://www.oii.ox.ac.uk/publications/ gigwork.pdf (accessed 24th June 2018).

Kuek, Siou Chew et. al. 2015. The Global Opportunity in Online Outsourcing. Washington D.C.: World Bank Group.

Lehdonvirta, V. 2017.Where are online workers located? The international division of digital gig work. http://ilabour.oii.ox.ac.uk/where-are-online-workers-located-the-international-division-of-digital-gig-work/ (accessed 24th June 2018)

Meyers, L., B. Minic, L. Raftree and T. Hurst. 2017. The Nexus of Microwork and Impact Sourcing: Implications for Youth Employment. http://gcyerti.com/wp-content/uploads/2017/02/The-Nexus-of-Microwork-and-Impact-Sourcing_Final_ONLINE_02.28.17_v2.pdf (accessed 25 May 2018)

Digital Labour

Development Implications of Digital Platform Labour

A new paper – “Understanding the Development Implications of Online Outsourcing: A Study of Digital Labour Platforms in Pakistan” – analyses the experiences of some of the millions of gig workers who undertake digital labour in developing countries via platforms such as Upwork and Freelancer.

Using the sustainable livelihoods framework as the basis for analysis, it identifies four things from interviews with workers and other stakeholders in remote areas of Northern Pakistan:

a) Employment Push: The context of politico-economic vulnerability that pushes unemployed individuals into digital work including lack of alternative employment, political instability and concerns about Islamic extremism.

b) Barriers to Gig Work: The typical barriers to digital gig work for those in more remote areas of developing countries. These include poor quality of technical infrastructure such as power and broadband connectivity; a lack of relevant knowledge and skills or the means to obtain them; limitations of current financial payment systems; and cultural norms that do not see online freelancing as constituting a “job”.

c) Worker Trajectories: The four trajectories of digital gig workers who go through training schemes: sinkers (the majority who never undertake digital platform work), strugglers (who try but appear largely unable to make a living), survivors (who can earn small amounts from digital gig work), and swimmers (who flourish and are able to build a career path via digital platforms).

d) Role of Institutions: The “re-institutionalisation” of digital labour. Notwithstanding narratives of the de-institutionalisation of digital gig work, experience in Pakistan shows three institutional forces impinging on online outsourcing to marginalised groups. There are the digital platforms themselves; often seen as improving the context for outsourcing work.  There are interventions of formal organisations – development, government and NGO agencies – who help overcome asset deficits that would otherwise exclude these groups from online outsourcing.  And there are informal linkages between freelancers themselves which provide assistance and work sub-contracts.