Digital Start-Ups in the Global South: Embeddedness, Digitality and Peripherality in Latin America

Abstract

There is debate about the extent to which digital activity is embedded or disembedded from various aspects of its context including place, institutions and networks. Yet little research has so far been conducted on this issue in relation to digital enterprises, particularly those in developing countries. Because of the growing importance of the digital economy in developing countries, an interview- and observation-based research study was undertaken of digital start-ups in the four largest Latin American economies, using the Triple Embeddedness Framework as its conceptual foundation. The paper finds that digital start-ups are multiply embedded: in both product and digital sector regimes, in both local and global industry regimes, and also in their economic and socio-political environment. This hybrid embedding is often a source of strength, particularly when embeddedness is strong enough to provide flows of knowledge and other resources but not so strong as to constrain innovation. The digitality of these start-ups helps achieve this “Goldilocks”/“just right” level of embeddedness in the digital sector, and in local and global contexts. Developing country positioning on the relative periphery of the global economy is also relatively helpful; allowing ideas to flow in but offering some protection from external competition. Some conclusions are drawn for government policy, business strategy and conceptualisation of digital embeddedness.