Paper short abstract

Using 2006–2010 firm data from 19 Latin American countries, I show digital servitisation exports boost incremental and market-novel innovation, especially when firms institutionalise digital knowledge routines (FDKAI) and invest in R&D and training.

Paper long abstract

Manufacturers increasingly pair products with digitally delivered services for foreign customers, yet we know little about how these Digital Servitisation Exports (DSE) reshape firm innovation in developing economies. Using firm-level data on 19 Latin American countries’ manufacturers in 2006 and 2010, I introduce a practical DSE measure and a Firm Digital Knowledge Acquisition Index (FDKAI) that captures routines and platforms for sourcing foreign knowledge through digital channels. To address selection, I combine entropy balancing, logit models with country, industry, and year fixed effects, and Oster’s coefficient-stability bounds in estimating DSE-innovation outcomes relationships. Three takeaways emerge. First, DSE is associated with more innovation of both kinds: incremental improvements that refine existing offerings (exploitative) and market-novel solutions that push the frontier (exploratory). Second, the innovation payoffs from DSE arise not from digital exposure alone but from complementarities: firms convert foreign digital knowledge into innovation outcomes when FDKAI works in bundles with conversion capabilities such as R&D and structured employee training. Third, exploratory innovation demands a richer bundle than exploitative innovation, suggesting that stronger conversion capabilities are required to turn DSE-enabled incremental gains into market-novel breakthroughs. These findings underscore that manufacturers in developing countries should treat DSE not merely as a sales route but as an engineered learning system, for which they should institutionalise platform-mediated workflows and invest in R&D and employee training.

Paper short abstract

Digitalisation does not automatically produce technological upgrading. Using Thailand’s semiconductor sector, this paper argues that capability building occurs only when global upgrading opportunities align with domestic capacities to exploit them.

Paper long abstract

Digitalisation is widely considered a pathway for latecomer economies to develop productive capabilities and move into higher-value activities. Yet participation in digitally intensive industries does not necessarily generate technological upgrading. Many countries have attracted investment in high-technology sectors while remaining concentrated in lower-value segments of global production networks, with digital transition reproducing, rather than disrupting, patterns of technological dependency. The key questions are whether digitalisation leads to technological capability building or technological dependency, and under what conditions.

This paper examines these questions through the case of Thailand’s semiconductor sector. Despite growing investment and sustained policy support, Thailand remains concentrated in assembly, testing, and packaging activities, while higher-value functions such as chip design and wafer fabrication remain concentrated among lead firms and advanced economies. This concentration reflects not merely technological distance but the governance structures of global production networks.

The paper argues that digital transition creates opportunities for learning, but technological upgrading depends on the interaction between global production structures and domestic institutions. It proposes the concept of “double contingency”: capability building occurs only when opportunities for upgrading generated by global-sectoral dynamics converge with domestic capacities to exploit them.

The findings suggest that the key challenge for latecomer economies is not simply access to digital technologies, but the political-economic conditions that enable technological knowledge to be internalised and transformed into indigenous capabilities.

Paper short abstract

Scholarship often claims that countries in Africa struggle to innovate because of weak 'macro-institutions'. However, the growth of the mobile money sector in Africa reveals that innovation can occur so long as regulators and firms design effective 'meso-institutions'.

Paper long abstract

How can African countries innovate when they have weak 'macro-institutions' often emerging from colonialism - corrupt and under-resourced legislatures, courts and police? In theory, weak macro-institutions, which apply to everyone in society, discourage firms from engaging in the type of long term relationships with each other which are required to develop new technological innovations.

The growth of the mobile money sector - now numbering over 500 million active accounts in Africa - reveals that innovation can occur so long as regulators and firms design effective 'meso-institutions'. These institutions are rules for specific sectors of the economy. Meso-institutions are a combination of private ordering (rules designed and implemented by firms and customers, such as contracts and industry norms) and, to varying degrees, regulatory intervention in that private ordering (through regulation and/or monitoring contracts and norms).

Choices made by regulators shape meso-institutions which in turn determine which sectors will scale in an economy and how those sectors can operate despite weak macro-institutions. This makes regulators the 'hidden gatekeepers' of innovation in Africa. Regulatory choices supported mobile money in several African countries, creating significant growth in the sector: Kenya (30 million users), Tanzania (16 million users), and Uganda (26 million users). In contrast, decisions made by regulators generated meso-institutions in South Africa and Nigeria which supported the banking sector, resulting in very small mobile money sectors in those countries. This analysis suggests scholars and practitioners in international development should pay more attention to meso-institutions, through, for example, increased training of regulators.