evaluating latecomer growth in information technology: a historical perspective

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Technological Forecasting & Social Change 75 (2008) 1339–1347

Research note

Evaluating latecomer growth in information technology:A historical perspective

Jeffrey James

Tilburg University, The Netherlands, Warandelaan 2, 5000 LE Tilburg, The Netherlands

Received 23 July 2007; received in revised form 7 October 2007; accepted 24 October 2007

Abstract

From a low initial base it is not difficult for developing countries to close the relative digital divide with thedeveloped countries. A more challenging and novel question is whether, because of leapfrogging and otherlatecomer advantages, developing countries have grown faster than developed from the same initial starting point.Or, is it the case rather that the disadvantages of being a latecomer exceed the advantages? Are there anypronounced outliers among the developing countries and what are their distinguishing characteristics? Using anumber of methods and data sources I seek to answer these questions in a tentative but provocative manner.© 2007 Elsevier Inc. All rights reserved.

Keywords: Digital divide; Information technology; Internet; Mobile phones

1. Introduction

Much of the recent literature on the digital divide has focused on the narrowing gap between rich andpoor countries over the past decade or so. Encouraging as this tendency may be, however, it does not initself reflect any great achievement on the part of the latter. For, as argued below, the closing divideoccurred from a major difference in initial levels of IT use. The starting point for developing countries wasin fact so low that almost any increase would have registered as more rapid growth than in the developedcountries. From this point of view, some decline in the divide was virtually inevitable. A more challenging

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1340 J. James / Technological Forecasting & Social Change 75 (2008) 1339–1347

and novel question [1] is whether, because of leapfrogging and other latecomer advantages (such as thefalling price of hardware), developing countries have grown faster than developed from the same initialstarting point. Or, is it the case, conversely, that the disadvantages of being a latecomer (such as lowincome, inadequate education and infrastructure) exceed the advantages, leading instead to slowergrowth? Are there any pronounced outliers among the developing countries in the sample and what aretheir distinguishing characteristics? In what follows I seek to answer these questions in relation to both theInternet and mobile phones, using the limited amount of data that are currently available.

1.1. The Internet [7]

Fig. 1 shows Internet users per 100 inhabitants for developed and developing countries over the period1994 to 2004(1).

Measured as the ratio of users in the former divided by those in the latter, the digital divide declinedfrom 73 in 1994 to 8 in 2004. Note however that the rapid convergence in this sense occurred from a verylarge difference in initial conditions. Whereas, that is to say, the developed countries began the periodfrom 2.18 users per 100 inhabitants, the corresponding figure. for developing countries was only .03. Infact, when one takes this difference into account some decline in the digital divide was almost inevitable.For, from that minute initial level, developing countries would only have needed an increase in thenumber of users to 0.7 per 100 inhabitants in order to achieve the same percentage growth that occurred inthe developed countries over the entire ten year period shown in the figure (that is, an average of 237% perannum). And in judging the speed of the decline (from 73 to 8) one needs again to take into account themajor difference in initial conditions between the two groups of countries.

It is worth noting that the optimistic scenario painted in Fig. 1 is based on a log scale (that effectivelycompresses the vertical axis). Use of raw data paint a very different picture where, as shown in Fig. 2,there is a sharply widening gap in Internet use between developed and developing countries. (In 2000

Fig. 1. Closing the digital divide in the Internet.

Fig. 2. Internet users per 1000 population, 1990–2000. Source: Based on Fink and Kenny [2].

1341J. James / Technological Forecasting & Social Change 75 (2008) 1339–1347

about one third of users in the former countries were using the Internet, whereas only some 0.4% in thelatter countries were online in that year). The growing digital gap in the figure serves to remind us thatthere are huge differences in actual Internet users in the global economy.

2. Accounting for differences in initial conditions

One way of eliminating this difference is to ask how long it took the developed countries to reach thelevel of 2.18 users per 100 inhabitants (by 1994) and compare that amount of time with the 6 years takenby the developing countries to reach the almost identical figure of 2.1 in the year 2000. The evidence onthis is unfortunately rather scant, but if one accepts the commonly held view that the Internet began in theearly 90s in the rich countries then these countries took only half the time needed by the poor countries toachieve the use level mentioned above. The growth rate, that is to say, was roughly twice as high in theformer than the latter. Logically, the next way of removing the low-base bias is to start at 2000, the year inwhich developing countries as a whole reached the starting point of 2.18 users per 100 inhabitants in thedeveloped countries. Between 2000 and 2004 the number of users had increased by slightly more thanthree-fold in the developing countries, as against the eight-fold increase achieved for the 4 years 1994 to1998 in the rich countries. Yet another way of looking at the issue is to examine the growth paths ofdeveloping countries with Internet use equal (or close) to 2.18, the level which developed countries hadreached by 1994. As shown in Table 1 five countries matched this requirement and their Internet use per100 inhabitants grew from 2.17 in 1999 to 12.8 in 2005. For their part the developed countries hadreached the level of 30.7 over the same number of years after 1994 (see Fig. 1), implying much fastergrowth.

Translated into differences in average growth, the figures are 82 and 218% for developing anddeveloped countries respectively. The table also shows that no individual country comes even close to thedeveloped country average. Apparently, any advantages of being a latecomer to the Internet are heavily

Table 1Developing countries with the same starting point as the developed countries (2.18 per 100)

Country Internet users per 100 inhabitants(1999)

Internet users per 100 inhabitants(2005)

Average annualgrowth rate (%)

Thailand 2.14 11.03 69.2Barbados 2.24 14.07 88.0Brazil 2.04 17.24 124.2Panama 2.19 6.39 32.8Turkey 2.23 15.31 97.8

Average=2.17 Average=12.8

Source: ITU (ict eye tables).

Table 2Developed countries with the same starting point as the developed countries (4.1 users per 100)

Country Internet users per 100 inhabitants(1999)


Annual averagegrowth rate (%)

Guyana 4.05 21.3 71.0Costa Rica 4.18 21.32 68.3Chile 4.16 28.93 99.2South Africa 4.04 10.75 27.7Belize 4.27 14.07 38.3



outweighed by the constraining forces of inadequate education, infrastructure and so on [3]. Developingcountries, that is to say, were far worse off in these respects in 1999 than were developed in 1994.

Another logical progression in the argument is to conduct the same exercise with a starting point of4.1 rather than 2.14 (that is, when the developed countries were 1 year further along their growthtrajectory). As shown in Table 2, another group of five developing countries matched this requirement andexhibited average growth of 60.9% between 1999 and 2005 (4.14 to 19.27). This compares with adeveloped country average of 130.9% (4.1 to 36.3), a differential that is similar to that recorded in relationto the entries shown in Fig. 1. And again in common with those results, no individual country in Table 2has a growth rate higher than the comparable developed country average.

It is true that this conclusion rests on a small sample of developing as opposed to developed countriesand consequent problems of statistical unreliability. It is also true however that the former sample can bedoubled by repeating the exercise with two other starting points, 3.0 and 6.0 (and yet further exercisesmight yield extra countries for the sample). In the appendix I report the results of these two additionalexercises, which, apart from one small, island economy, lend further support to the preliminaryhypothesis that developing countries exhibit a lower growth rate than developed over the comparableperiod.

The pattern described above does not however apply to all latecomer countries. Perhaps the mosttelling exception is the case of Korea, to which I now briefly turn [3].

The number of Internet users in that latecomer country amounted to 1.6 million in 1997 (3.7% of thepopulation). By 2001, according to most estimates (eg. 3) the number of users had reached a figure of


almost 25 million (or 56% of the population). Now, looking again at Fig. 1 it appears that Internet use of3.7%was achieved in the developed countries between 1994 and 1995, so that subsequent growth in thosecountries can be compared with what occurred in Korea. The question, in particular, is how long it tookthe developed countries (from 1994/5) to reach a level of Internet use equal to 56% (the Korean case). Andthe answer is that this level had not been reached even by 2004, the end of the ten year period covered inthe figure. By 2001, in fact, developed countries had reached only 36.3% of the population, emphasizingjust how exceptional the Korean case really was. Whatever the reasons for this ultimately were, they hadlittle to do with income. For even by 2005, this country's per capita income was almost three times lessthan the average of high-income countries (World Bank).

Part of the explanation undoubtedly lies in the high levels of literacy and user skills that Korea hadalready attained by 1977. Adult literacy, for example, at 97.2%(4) was almost universal. Another morespecific part of the explanation turns on the skills and capabilities required in the electronics industryitself. What is absolutely central here is the role played by government in Korea. For, along withother East Asian ‘miracle’ countries Korea ‘set a strategy to master core technological capabilities andbecome competitive in the IT industry — their strategic intent sustained their efforts and led tocumulative learning and higher value-added production. The need to anticipate the firm's or thecountry's comparative advantage has become important, to allow for lead time for learning, lumpyinvestments, the building of support infrastructures, and training or recruitment of a critical mass ofengineers’(5).

In pursuit of its national strategic intent, Korea used, to excellent effect, a range of policy instruments intrade, credit, foreign investment, special education and technological support to bolster the efforts of firmsto acquire ‘core competencies'. This represents a far cry from many contemporary developing countrieswhich have no strategic plan in the area of technological capabilities. What they have instead are rathervague statements about the importance of information technology and the need to extract its benefits.These countries should pay heed to the experience of the NICs (newly industrializing countries) which‘suggests that national strategies need to address systemic constraints to the use and diffusion of IT. Thisinvolves organizational adjustments and coordinated actions by firms, industries, and government, withemphasis on management, skills and restructuring’(5). Note, finally, that strategic intent and the sustaineddevelopment of core competencies themselves explain ‘some of the motivations and modalities ofnational policies and programs to diffuse IT as a generic technology’(5).

2.1. Mobile phones

Mobile phones are likely to exhibit a better growth performance than the Internet in comparison to theexperience of the developed countries. There are two reasons for this. One of them is that mobiletelephony is much less demanding than the Internet in terms of affordability, user capabilities andinfrastructure.(6) The other reason is that the former technology is better placed than the latter to takeadvantage of what is described as ‘leapfrogging’.

The essential idea behind this concept is that developing countries can benefit from the fact of nothaving invested in earlier versions of a technology and are hence able to leapfrog directly andadvantageously to the latest version. A good example is the potential afforded to developing countries bydigital switching technology, the successor to electro-mechanical systems. In particular, these countriesdid not suffer from the disadvantage of having large, established mechanical networks and thus had a‘remarkable opportunity’ to leapfrog this technology, ‘avoiding the expense of replacing obsolete (though


young in age) capital stock and problems of technological cumulativity, and start their telecommunica-tions infrastructure from scratch’ (7) In the case of mobile phones the obvious analogy is with fixed-lineswhich some developing countries have been able to bypass altogether (Cambodia is one of the best-known examples in this regard [4]).

The question is now whether and to what extent the expected difference between mobile phones andthe Internet shows up in the data. For comparative purposes I follow exactly the methodology that wasused above in relation to the Internet. Fig. 2, for example, is the precise counterpart of Fig. 1, showing as itdoes, the closing of the digital divide in mobile phones between 1994 and 2004. (Here again though use ofabsolute numbers would show a growing rather than shrinking divide).

3. Accounting for differences in initial conditions

According to the UNDP(8) there were 1.3 mobile phones per 100 inhabitants in the developedcountries by 1990. It took four more years to reach the level of 5.2 in 1994 (see Fig. 2). In developingcountries, on the other hand, it took only 3 years to achieve much the same rate of progress, offering a hintperhaps of leapfrogging at work. The next way of removing the low-base bias, however, leads to asomewhat different conclusion. The starting point, as in Fig. 1, is 2000, the year in which developingcountries as a whole reached slightly more than the starting point of 5.2 users per 100 inhabitants in thedeveloped countries. Between 2000 and 2004 the average annual rate of growth in the developingcountries was 41.4%, as against the 24.6% achieved in the developed countries between 1994 and 1998.In this comparison the latter countries are favoured, though to a lesser extent than in the case of theInternet.

I now examine the growth paths of developing countries with mobile phone subscriptions equal orclose to 5.2 and 8.2, the levels which developed countries had reached by 1994 and 1995 respectively. Asshown in Table 3, I chose the five countries that most closely met this requirement for the base level equalto 5.2 subscribers per 100 inhabitants.

Average growth in the developing countries, from 5.28 to 49.22, is equal to 138.7% as against thesimilar figure of 142.3% for the developed countries. Much of this average performance in the formercountries, however, is due to a major outlier, Jamaica, which far exceeded the growth rate achieved by the

Table 3Developing countries with the same starting point as the developed countries (5.2 subscriptions per 100)

Country Mobile phone subscriptionsper 100 inhabitants(1999)

Mobile phone subscriptionsper 100 inhabitants(2005)

Average annuagrowth (%)

Azerbaijan 4.58 26.66 80.3Bolivia 5.16 26.37 68.5Dominican Republic 5.38 40.68 109.0Jamaica 5.59 105.78 298.7Botswana 5.70 46.63 119.7



l

Table 4Developing countries with the same starting point as the developed countries (8.2 subscriptions per 100)

Country Mobile phone subscriptionsper 100 inhabitants(1999)

Mobile phone subscriptionsper 100 inhabitants(2005)

Average annuagrowth (%)

Mauritius 8.70 52.76 84.4El Salvador 8.31 35.05 53.6Mexico 7.94 44.04 75.8Panama 8.27 52.46 89.0Paraguay 8.13 30.64 46.1



Fig. 3. Closing the digital divide in mobile phones.


l

latter countries. (Jamaica's exceptional growth over the period seems to have been mainly about rapidliberalization of the telecommunications sector, which began in 1999 with the introduction of competitionin wireless cellular services. The increased competition, in turn, led to lower prices and further adoption ofmobile phones in the country. By 2003 the sector was fully liberalized). No other country in Table 3 grewat an average annual rate of 142.3%. Let me now examine if the pattern becomes clearer with a differentgroup of countries whose rate of subscriptions per 100 inhabitants in 1999 was equal to 8.2 rather than5.2.

The relevant information is contained in Table 4, which is analogous in every way to Table 2 for thecase of the Internet.

In this case average growth in the developing countries, from 8.27 to 43.0, is equal to 70%, as opposedto the figure of 102% in the developed countries. Unlike Table 3, there is no single country with a growth


rate higher than that latter amount (perhaps partly because all but one of the sample is from Latin America[5]. Both tables, however, tend to undermine the idea that leapfrogging is rampant in the developingcountries, even if average rates of growth tend to be more similar to those in developed countries than wastrue of the Internet (Fig. 3.).

4. Conclusions

In this note I have proposed moving away from discussions about the closing digital divide to a morechallenging assessment of latecomer progress in information technology. That apparently novel form ofassessment is one in which growth rates in the Internet and mobile phones are compared betweendeveloped and developing countries, when they both start from the same initial base level [6]. The lattercountries enjoy certain advantages as latecomer adopters but they also have to contend with certaindisadvantages. In the case of the Internet the evidence clearly pointed to (much) lower growth indeveloping than developed countries (with only South Korea standing out as a striking exception). Withregard to mobile phones, the gap in growth rates was predictably smaller (with Jamaica emerging as aclear outlier). These findings, however, should be regarded very much as tentative, based on evidence thatis limited in terms of the periods it covers and the number of countries observed.

5. Notes

1) No-one, as far as I am aware, has dealt with this specific questions although there is of course a vastliterature on the digital divide, lateness, leapfrogging and so on.

2) Parts of this section rely on [7].3) Policy is of course also a crucial variable.4) Almost certainly, a similar story can be told for the East Asian NICs.5) In terms of regions, Africa has the highest ratio of mobile to total telephony.6) Latin America is not a region that is especially noted for its leapfrogging potential, as compared say

with Africa or East Asia.7) Note that although I have controlled for differences in initial conditions, I cannot of course control

for all the differences that confronted countries in one period as against another.

Appendix further calculations for Internet users

1. Using 3 per 100 inhabitants as the starting point

Country


Argentina
3.3 17.8 73.2 Venezuela 2.9 12.6 56.1 Bulgaria 2.8 20.6 104.7 Romania 2.7 20.8 112.4
The growth over 6 years for developed countries (inferred from Fig. 1) is from 3.0 to 33, yielding an average of 166.7%.


2. Using 6 per 100 inhabitants as the starting point

Country


Seychelles
6.5 26.0 49.8 Puerto Rico 5.3 22.1 53.0 Trinidad & Tobago 5.8 12.2 18.5 Antigua 5.3 35.6 94.8 Lebanon 6.6 19.6 32.9
The growth over 6 years for developed countries (inferred from Fig. 1) is from 6.0 to 38.0, yielding an average of 88.9%.

References

[1] International Telecommunications Union, World Telecommunication/ICT Development Report 2006, Geneva, 2006.[2] C. Fink, C. Kenny, W(h)ither the global digital divide, Info – The Journal of Policy, Regulation and Strategy for

Telecommunications 5 (6) (2003).[3] J.-S. Hwang, South Korea, Digital Review of Asia Pacific, 2003, (available at http://www.digital-review.org/03_publishers.

htm).[4] N. Hanna, S. Boyson, S. Gunaratne, The East Asian Miracle and Information Technology, World Bank Discussion

Paper, vol. 326, 1996.[5] C. Kenny, Information and communications technologies for direct poverty alleviation, Development Policy Review 20 (2)

(2002).[6] C. Antonelli, The Diffusion of Advanced Telecommunications in Developing Countries, OECD, 1990.[7] J. James, Correspondence, Current Science 93 (6) (2007).

Jeffrey James is Professor of Development Economics at Tilburg University in the Netherlands, where he has also served asDirector of the CENTER Graduate School in Economics and Management. He was previously Assistant Prof. of Economics atBoston University and Research Fellow in Development Economics at Queen Elizabeth House, Oxford.

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