Determinants of digital technologies' adoption in South African manufacturing: Evidence from a firm‐level survey

Abstract

AbstractDigital technologies and digitalisation are emerging as new drivers of structural transformation in developing countries. At the firm level, adopting advanced digital technologies offers prospects for improved productivity and competitiveness and, hence, digital industrialisation. However, the determinants of adopting digital technologies in manufacturing firms in developing countries remain anecdotal. This paper uses unique survey data on 516 manufacturing firms in South Africa and a multivariate probit model to examine the determinants of digital technology adoption in South African manufacturing firms. Our results show heterogeneity in the factors explaining digital technology adoption across business functions. Overall, the empirical results reveal that innovation, foreign ownership, exposure to export markets, and higher skilled human capital propel the adoption of digital technologies. In contrast, the lack of capital inhibits the adoption of digital technologies in sampled manufacturing firms in South Africa. We discuss the possible policy implications of these findings and how they fit into the South African Digital Skills policy discourse.