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New working paper: Bounded Opportunities for Digital Enterprises in Africa

African digital entrepreneurs like Tayo Oviosu (see tweet in the picture) are forcefully pursuing the aspiration that African technologies will one day be used by millions of users around the world. We want to share a working paper that discusses this ambition. In the paper, we’re examining the possibilities for African digital firms to scale internationally. Our interviews with entrepreneurs in Nairobi, Kigali, Accra, and Lagos show that, in purely digital markets (e.g., software and apps), it’s tough for African enterprises to compete with incumbents from Silicon Valley and other clusters in the Global North. It seems that those African digital enterprises thrive that are able to integrate analog and digital value creation, addressing a specific local problem that is widespread but unaddressable for foreign competitors in a cost-effective way. This doesn’t mean that Tayo’s vision is unrealistic; it only means that it will take rather exceptional founders and companies to break the pattern that most African digital enterprises currently fall into. The paper is on SSRN. Here is the abstract:

Digital enterprises from the US, Europe, and East Asia have been recognized for their potential to achieve global market reach, and for forming a globalized digital infrastructure. However, digital enterprises from economically peripheral countries have usually remained local. This paper seeks to understand the enterprise-level reasons for these global differences. Drawing on in-depth interviews with founders, we empirically examine the value creation and geographical market scope of 73 digital enterprises in Lagos, Nairobi, Accra, and Kigali. We develop theory that explains why enterprises in global economic peripheries are able to exploit some but not all opportunities of digital technologies. In contrast to the claim in current scholarship that digital enterprises can operate in relatively unbounded ways, we find that African enterprises cannot compete in global digital markets and are ultimately compelled to offer localized digital products. Based on these findings, we theorize that digital products with the greatest global scaling potential are the least likely to be owned and controlled by digital enterprises located in economic peripheries. We thus encourage scholars of digital enterprise to more carefully take geographical variation into account, and acknowledge technological drivers of increasing unevenness in the global digital economy.

Nicolas Friederici

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