Digital transformation in Latin America: Challenges and opportunities

Abstract

Over the last decade, the rapid pace of adoption of technological innovations has affected not only incumbent business models but also socio-economic scenarios, leading to digital transformation initiatives in various sectors of the economy (Sebastian et al., 2017; Wanasinghe et al., 2020). These digital transformation initiatives have led to a deep and accelerated revamping of activities, processes, competencies and business models, which has enabled changes and opportunities both in the business world and in society as a whole (Demirkan et al., 2016). In fact, the growing need to rethink the value creation of organisations through Information and Communication Technology (ICT) seems to be at the heart of digital transformation initiatives in companies (Mergel et al., 2019; Muehlburger et al., 2019).

The notion of digital transformation has now become ubiquitous and is most often understood as a change in the way an organisation employs digital technologies to develop a new digital business model that helps it generate more value (Lanzolla et al., 2020). Thus, digital transformation is considered to be both an imperative and a complex requirement that must be met by organisations as they strive to remain competitive in the digital world (Vial, 2019).

Recent surveys show that Latin America is home to approximately 10% of the world's population and possesses nearly 10% of its wealth. This information alone should be enough to justify the socioeconomic importance of the region. However, nearly 50% of the inhabitants of Latin America live in dire poverty, without access to clean water, adequate housing and education. In other words, they are unable to satisfy their basic human needs and, worse still, they don't even have the opportunity and freedom to make choices in their own lives (Joia, 2024).

In fact, Latin America has grown at a steady pace, progress is being made on alleviating poverty levels, and higher incomes have fuelled demand for technology, which in turn can have additional benefits that will eradicate some of the challenges listed above. In fact, there is a growing interest in ICTs and their positive impacts on the economy, government and society. The region is well-positioned to take advantage of ICT to enhance productivity, reach higher levels of competitiveness at the global level, improve government services, and provide educational opportunities for its population. Latin America thus provides a unique context from which examples about the adoption of ICT in a variety of regional, cultural, and economic contexts can be elicited (Joia, 2024).

However, as most countries in Latin America are developing economies, their trajectory of ICT-enablement and digital infusion are likely to be different from those experienced in developed economies, not least because the rules of competition of the digital economy are largely based on knowledge, digital connectivity, and ubiquitous capabilities. Businesses in developed countries find opportunities based on their ability to use the Internet, mobile technologies and other emerging ICTs to reach customers and to achieve transactional efficiency and overall socioeconomic growth. Given these observations and the fact that an understanding of the digital trajectory should consider local geographical, cultural and social contexts and structures (Davison & Martinsons, 2016; Walsham, 2018), we recognise that there is a need for research on digital transformation initiatives in the Latin American context.

Given this backdrop, the purpose of this special issue of the Information Systems Journal on “Digital Transformation in Latin America” is to enable an exchange of viewpoints and build a common understanding of game-changing opportunities accrued from digital transformation initiatives in Latin America. Through this process we aim to initiate the construction of a Latin American body of knowledge related to the use of emerging ICT for sustainable development in this region. In other words, in this special issue we seek to promulgate the advanced knowledge that scholars have to share regarding the experiences of organisations, public administration and other segments of society with respect to digital transformation initiatives in the region.

We had multiple submissions for this special issue. A total of twelve papers were received of which ultimately three papers were accepted after multiple rounds of rigorous reviews.

In the first article, Klein and Braido (2024) study SME start-ups and the institutional factors that affect their performance in digital markets in Brazil. The study includes two case studies: the first, conducted with exploratory aims, focused on fintech companies. The second case study examined start-ups and SMEs in the IoT industry to assess the consistency of findings across different sectors. As anticipated, both case studies underscored the pivotal role of the institutional context in shaping the landscape of digital entrepreneurship. The article concludes with the relevance of the participation of underprivileged actors (SMEs and start-ups) in the development of the institutional work to generate the required institutional changes that will affect the legitimacy of digital innovations and start-ups, granting them access to resources and markets, ultimately benefiting the entire market ecosystem.

In the second article, Aguerre and Bonina (2024) examine a digital platform for public services in Montevideo, Uruguay. Using a three-layered governance approach, the authors emphasise the collaboration between non-governmental organisations to enhance governmental transparency and service efficiency, crucial amidst recent democracy-reversing movements in the region. The research utilises an in-depth interpretive case study method, analysing the platform's implementation across open, regulatory, and ideological governance levels, highlighting a mutually reinforcing effect. The authors stress the importance of an ideology of open government as a differential enabler of the project, the establishment of formal agreements to mitigate risks posed by political changes, and the significance of a multi-actor ecosystem in legitimising and democratising the platform. This perspective offers valuable insights for policymakers across different countries, especially considering Uruguay's favourable conditions for digital transformation endeavours.

In the third article, Erskine and Andrade-Rojas (2024) present an interesting take on how bribery has a detrimental effect on digital transformation for Small and Medium Enterprises (SMEs) in Latin America. It also showcases how tax burden, firm size, and managerial experience play important roles in this relationship. The study leverages secondary data from a survey conducted by World Bank on SMEs in Latin America. Through its focus on bribery, this study illustrates a novel barrier to digital transformation in Latin America. By revealing a dark socioeconomic angle that can inhibit digital transformation initiatives, this study has important implications, notably for policies and regulations aimed at reducing bribery so as to enable the digital transformation trajectory in developing economies.