Small businesses, which employ nearly 40% of the global workforce, are essential for sustainable development but often remain trapped at low levels of productivity. This report addresses the knowledge gap on how these enterprises, particularly informal ones, can use digital technology to grow. Its aim is to understand why only some of them manage to fully exploit digitalization and how it affects the majority. To do this, it analyzes the relationship between the digital revolution and informal enterprises, offering two models on how digitalization influences their performance.
The analysis focuses on the «capabilities» of the enterprises—the skills, attitudes, and expertise of their owners and staff—which determine their ability to benefit from digitalization. The report identifies five types of micro and small enterprises (MSEs) with different capability levels, ranging from small traders to high-tech startups. It also considers external factors such as the local digital ecosystem and the enterprise’s position in the supply chain. This multidimensional approach helps to understand the complex dynamics that influence technology adoption.
The report details the opportunities and barriers of digitalization for MSEs. Opportunities include better access to information, new markets, financial services, and formalization. Barriers, on the other hand, cover the digital divide, skill shortages, risk aversion, and cybersecurity challenges. In conclusion, the report highlights that digitalization is not an automatic process. Success depends on a company’s internal capabilities and external factors. It therefore recommends that support policies should not only promote technology adoption but also invest in skills, mindsets, and management abilities so that MSEs can truly thrive in the digital age.
Year: 2021
ISBN: 978-92-2-034942-7 (print)
ISBN: 978-92-2-034943-4 (web PDF)
Produced by the Publications Production Unit (PRODOC) of the ILO
