There is widespread belief among international agencies and development specialists in the potential value of information technology (IT) to support economic and human development. Some question whether IT alone can have a major impact on the standard of living in developing countries, but most see it offering access to vital information and services such as weather forecasting, commodity prices, health care, and education. However, a significant digital divide exists between richer and poorer countries in the use of IT and the availability of complementary assets such as telecommunications networks and skilled IT professionals. This gap has led to a public debate about what can be done to promote greater IT use so that developing countries can achieve the types of benefits already being enjoyed in the industrialized world.

The problem currently is diagnosed by some as resulting from a lack of affordability of computer hardware, with various low-cost computers such as a $100 laptop being offered as solutions. Others view the problem as part of a broader set of issues that include poverty, lack of infrastructure and inadequate education. To inform these policy discussions, it is important to understand the factors that influence IT use at the country level and whether there are differences in these factors between developed and developing countries. Policy efforts based on incorrect assumptions are likely to have little impact on IT diffusion or economic development.

Eric Shih, Kenneth L. Kraemer, and Jason Dedrick analyzed data from 44 countries over a 15-year period and found markedly different results for developing and developed countries. These results have implications for government policymakers and others interested in promoting IT investment for economic development.

For developing countries to realize the potential benefits of IT, policymakers should look for ways to promote IT investment as well as developing investment resources, complementary assets, and openness to external influences. The empirical findings suggest several policy recommendations.

• Resources for technology investments. The analysis suggests that availability of loans and credit is crucial for developing countries, which means that the maturity and dynamics of the financial system is a key variable for those countries
  
• Complementary assets. Increasing investment in telecommunications infrastructure, which is usually best accomplished by policies that introduce competition into that sector, will promote IT diffusion. Over the longer term, increasing tertiary education levels will also be beneficial in developing skills needed for IT use.
  
• Openness to external influences. Encouraging foreign investment by removing restrictions and improving the environment for foreign capital is likely to have a major impact. In cases such as Mexico and Brazil, economic liberalization that led to investment by foreign multinationals stimulated IT use.

A copy of their full study can be found at the ACM website.

(CRITO Research Spotlight, April 2008)

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