Digital Transformation and Organizational Performance in Developing Economies: Strategy, Innovation, Governance, and Institutional Change

Abstract

Digital technologies have spread quickly through developing economies, but the organizational and developmental returns to that spread have been uneven. This article reviews scholarship published up to 2021 on the relationship between digital transformation and organizational performance in developing economies, and on the roles that strategy, innovation, governance and institutional change play in that relationship. It brings together two literatures that have developed largely apart: research on digital transformation in management and information systems, which draws mainly on incumbent firms in advanced economies, and research on information systems in developing countries, which has long documented the gap between system designs and local realities. The review reaches four conclusions. First, much of what is described as digital transformation in developing economies is digitization or digitalization, and performance expectations should be calibrated accordingly. Second, the effect of digital investment on performance is indirect: it operates through changes in processes, business models and structures. Third, that effect is conditioned by complements that are not themselves digital, including infrastructure, skills, regulation and accountable institutions. Fourth, governance determines whether digital innovations scale beyond pilots, and successful transformation can itself alter the institutional environment. The article integrates these conclusions in a conceptual framework and a typology of transformation outcomes, states four propositions, and identifies implications for managers, policymakers and researchers.