How does context affect new digital start-ups in the global South?
The open-access paper, “Embeddedness of Digital Start-Ups in Development Contexts” provides some answers, using the Triple Embeddedness Framework:
Based on a study of 19 digital start-ups and 20 other start-up ecosystem organisations, this research makes three main conclusions.
1. Hybrid Embeddedness. These young enterprises are hybrids that straddle multiple contexts:
– They are embedded in both their vertical product sector but also the cross-cutting digital economy. Some successful start-ups borrow ideas or staff from other digital firms; helping them to innovate in their product sector.
– They are also embedded in both local and global contexts. Some successful start-ups mimic business models from the US and draw financing and training from the US; and then use this to innovate within their country or region.
2. Optimal Embeddedness. The most-successful digital start-ups find a “Goldilocks”-style sweet spot in their relation to context. They are not so deeply embedded that they are trapped within existing institutions and unable to innovate. But they are sufficiently embedded that they can draw knowledge, money, skills, etc from their context.
3. Global Peripherality. Some global South digital economies have a “semi-permeable membrane” between themselves and the global North. Ideas and other resources can flow in to assist digital start-ups, but they have some relative protection from external competition.
Practical implications include:
– The need for global South governments to keep building local digital sector institutions; particularly network intermediaries that link local and global digital economies
– The need for digital start-ups to self-analyse their embeddedness: understanding the extent of constraint and freedom imposed by embeddedness in both digital and product sectors
– The need for business methodologies from the global North, such as Lean Start-up, to be re-scoped to better incorporate the realities of global South contexts
We look forward to further work on context and the digital economy in the global South.
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