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76 WORLD DEVELOPMENT REPORT 2016 Figure 1.19 Many countries still have poor postal delivery systems Percentage of population receiving home postal delivery in 2012 Percent 50 45 40 35 30 25 20 15 10 5 0 Botswana Burkina Faso Central African Republic Congo, Dem. Rep. Gabon Kenya Rwanda Swaziland Tanzania Togo Uganda Malawi Burundi Lesotho Comoros Guinea Liberia Niger Oman Senegal Benin Jordan Angola Sudan Bolivia Sources: Universal Postal Union (http://www.upu.int/en.html); UNCTAD 2015. Data at http://bit.do/WDR2016-Fig1_19. Mongolia Ghana Panama Vietnam Mozambique Nigeria Lao PDR Haiti Nicaragua Zimbabwe Jamaica Note: The figure shows the 36 of 130 countries where less than 50 percent of the population receives mail delivery at home. Qatar and the United Arab Emirates have been excluded because they have a comprehensive public postal delivery system even though they usually do not deliver mail to homes but instead to local post offices. Map 1.3 International online payment systems for businesses are unavailable in many parts of Africa and Central Asia, 2012–14 Major online payment systems None available PayPal PayU MercadoPago Two or more available No data available Sources: World Bank staff calculations; UNCTAD 2015. Data at http://bit.do/WDR2016-Map1_3. IBRD 41768
ACCELERATING GROWTH 77 together with the lower transaction costs in online marketplaces should, in turn, encourage more firms (in developing countries) to use the internet to export to foreign markets in coming years. Countries need policies to encourage competition Domestic or foreign barriers to entry and competition reduce firms’ incentives to invest in digital technologies or complementary skills and reorganization. Without competitive pressure, private firms lack incentives to invest in costly or risky new technologies. The complementary factors at the firm level correspond to competition policies at the country level. Firms are more likely to invest in skills or organizational restructuring if they are subject to product market competition. 61 European manufacturers are investing in machines that communicate with one another (internet of things) to escape the increasing competition from low-cost Asian producers. For instance, BuS Elektronik invested in information technology to specialize in custom-designed electronics components produced in lot sizes that are too small to spur the entry of Asian electronics firms. The Daimler Group’s Smart automobile plant uses modern information technology to integrate assembly and production lines among a network of seven large suppliers. The interlinked production system allows Daimler to optimize its value chain and to customize its products, with 10,000 variations of its vehicle cockpits. Low-cost factories in emerging countries cannot easily copy this strategy, which requires proprietary data. 62 The mechanism is illustrated in Schumpeterian growth models predicting that each firm will invest in technologies new to the firm to reduce its costs and escape competition—albeit only temporarily. But these incentives are attenuated when leading firms in the sector have cost advantages that trailing firms cannot overcome. The market leaders have little incentive to invest in technologies new to the firm since they do not face competitive pressures to reduce their costs; the laggard firms are too far away from the frontier to bridge the cost gap and instead use vintage production technologies, focusing on local market niches to survive. 63 Thus fast-growing sectors with a high share of firms using new technologies exhibit specific firm dynamics, echoing high firm churning and neck-and-neck competition market structures, forcing firms to enhance their efficiency by investing in more productive technologies. The positive links among competition, technology adoption, and productivity growth are well documented. 64 Consistent with the Schumpeterian mechanism, firms in more contested industries use digital technologies (more effectively). The allocation and selection mechanism in more contested markets drives firms to invest in new digital technologies. 65 Competition from China has induced the adoption of new technologies and ICTs in OECD countries, accounting for 15 percent of their technology investment between 2000 and 2007 and contributing to their productivity growth. 66 Arguably, the entry and innovations of Taobao, Alibaba’s consumer-to-consumer (C2C) platform, were at least in part encouraged by foreign competition from eBay. Similarly, firms in more contested sectors in Vietnam, which have higher entry and exit rates, are more likely to invest in broadband internet. And younger firms in Mexico use e-commerce more intensively: the share of online sales in total sales is almost twice as high in young firms (less than five years old) than in older firms. 67 In France, automobile dealers enhanced their investments in ICT, such as human resource software and other innovations, when facing more intense product market competition after the liberalization of the automobile distribution system in the European Union in 2002. 68 In high-income countries, the youngest firms use the internet more intensively, while in low-income countries, the oldest firms do (figure 1.20). In lowincome countries, however, startups seem to face barriers to more intensive internet use, which the oldest firms (typically also larger) tend to overcome. In middle-income countries, the results are mixed. Domestic firms in developing countries use the internet more intensively when they face pressure from foreign competition. The probability that domestic firms (with at least five employees) facing foreign competition use broadband internet increases by 41 percent; that they sell their products online, by 29 percent; and that they purchase inputs online, by 36 percent (figure 1.21). The increase in internet use due to foreign competition is independent of firms’ initial productivity. Among six African countries in 2014, for instance, increased competition incentivized firms to use the internet more intensively, leading to more product and process innovation. Firms that had experienced more competitive pressure, leading to a decline in their market shares over the past three years, invested in more intensive uses of the internet. For example, a 10-percent reduction in the market share increased the probability that these firms used the internet to market their products, on average, by 11 percent, and the probability that they used the internet to manage their inventory by 8 percent. 69 Domestic firms in
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A World Bank Group Flagship Report
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Contents xiii xv xix Foreword Ackno
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CONTENTS vii Boxes O.1 5 Frequently
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CONTENTS ix O.24 35 Digital safegua
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CONTENTS xi B3.8.1 178 Autocratic g
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Foreword We find ourselves in the m
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Acknowledgments This Report was pre
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ACKNOWLEDGMENTS xvii Karl Chua, Mas
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xx ABBREVIATIONS GDP GIS GNI GPS GS
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xxii ABBREVIATIONS BFA Burkina Faso
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Inclusion Efficiency Innovation
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OVERVIEW 3 Figure O.1 Digital techn
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OVERVIEW 5 Box O.1 Frequently asked
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OVERVIEW 7 Map O.1 The internet is
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OVERVIEW 9 Figure O.6 The digital d
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OVERVIEW 11 This mechanism operates
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OVERVIEW 13 Figure O.10 The size of
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OVERVIEW 15 Box O.3 Bridging the di
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OVERVIEW 17 sector is thus challeng
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OVERVIEW 19 skills that help them b
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OVERVIEW 21 Figure O.15 Labor share
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OVERVIEW 23 Figure O.18 From a tech
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CHAPTER 3 Delivering services Have
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e-HEALTH 191 Figure F3.1 Sequencing
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4. Sectoral policies 5. National pr
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SECTORAL POLICIES 201 Box 4.1 Polic
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SECTORAL POLICIES 205 is independen
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SECTORAL POLICIES 209 role for the
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SECTORAL POLICIES 211 subscriptions
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SECTORAL POLICIES 213 Box 4.5 The l
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SECTORAL POLICIES 215 Box 4.6 Guate
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SECTORAL POLICIES 217 Figure 4.1 Pr
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SECTORAL POLICIES 219 Box 4.7 How b
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SECTORAL POLICIES 221 mandating tha
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SECTORAL POLICIES 223 the internet
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SECTORAL POLICIES 225 Protecting pe
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SECTORAL POLICIES 227 grown since t
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SECTORAL POLICIES 229 Box 4.9 Tech
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SECTORAL POLICIES 231 Box 4.10 Isra
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SECTORAL POLICIES 233 US$74 million
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SECTORAL POLICIES 235 has been clas
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SECTORAL POLICIES 237 Kende, Michae
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242 WORLD DEVELOPMENT REPORT 2016 i
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THE DATA REVOLUTION 245 Figure S5.1
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THE DATA REVOLUTION 247 A journalis
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NATIONAL PRIORITIES 249 • Rising
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NATIONAL PRIORITIES 251 schools, ho
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NATIONAL PRIORITIES 253 Figure 5.3
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NATIONAL PRIORITIES 255 requiring f
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NATIONAL PRIORITIES 257 around the
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NATIONAL PRIORITIES 261 Box 5.3 The
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NATIONAL PRIORITIES 263 Box 5.5 Kha
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NATIONAL PRIORITIES 265 Box 5.7 Eme
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NATIONAL PRIORITIES 267 Box 5.8 Bui
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NATIONAL PRIORITIES 269 Box 5.9 Bui
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NATIONAL PRIORITIES 271 • Explore
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NATIONAL PRIORITIES 275 identify gh
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NATIONAL PRIORITIES 277 Table 5.7 T
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NATIONAL PRIORITIES 279 Box 5.13 Es
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NATIONAL PRIORITIES 281 experiences
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NATIONAL PRIORITIES 283 dence.” N
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NATIONAL PRIORITIES 285 Kremer, Mic
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ENVIRONMENTAL MANAGEMENT 323 Map F6
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