Tech adoption linked to better performance in firms

Singapore

THE adoption of more digital technologies by firms, including small and medium-sized enterprises (SMEs), is linked to better performance in terms of value-added and productivity, according to a study by economists from the Ministry of Trade and Industry (MTI).

At the same time, it was found that the pick-up of advanced tools such as e-commerce, data analytics and the Internet of Things (IOT) remains low, with SMEs the main cause for this phenomenon.

The MTI study examined firms' adoption of three different levels of digitalisation: the first is basic digital tools, comprising Internet usage, computer usage, Web presence and infocomm security; the second is digital platform tools, made up of e-payments, e-commerce and software as a service; and finally, advanced digital tools.

The study analysed data from 2014 to 2016, and covered about 1,150 firms.

It found that basic digital tools were widely adopted in Singapore by almost all the firms, but adoption rates for digital platform tools and advanced digital tools are considerably lower, with a sizeable share of firms only adopting at most one of these tools.

Among firms which adopted advanced digital tools, less than 35 per cent adopted all three - particularly in the case of artificial intelligence.

Regression results showed that the adoption of digital platform tools or advanced digital tools is associated with a statistically significant increase in their value-added and productivity, at 25 per cent and 16 per cent respectively on average.

Findings showed that SMEs were mostly responsible for the low adoption rate of more advanced digital technologies, with SMEs adopting an average of 1.9 digital tools (of either digital platform tools or advanced digital tools) - lower than the average of 2.6 tools adopted by non-SMEs.

The study's authors said that the findings are in line with those of other international studies, providing further evidence that a higher level of digital adoption by firms is linked to better firm performance.

Even as digital technology adoption has improved in recent years, the authors said, there is room for firms in Singapore - especially SMEs - to make further progress in their digitalisation efforts.

"Moreover, as the adoption of an additional digital tool is linked to an improvement in firms' performance, the government will also continue to help firms overcome hurdles in their digitalisation journey so that they can reap the benefits," said the economists.

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