Digitalisation and the Performance of Micro and Small Enterprises in Yogyakarta, Indonesia

Abstract

This study examines the effects of internet use, as part of digitalisation, on the performance of micro and small enterprises (MSEs) in Yogyakarta province. Using primary data on MSEs in Yogyakarta, the paper exploits conceivably exogenous variations in the cellular signal strength that MSEs receive to connect to the internet, once number of local cellular transmitters, location topography, local building and infrastructure development and sectoral characteristics are controlled. The findings show that internet use has enabled MSEs to engage in the digital economy and has improved labour productivity and exports. The associated monetary benefit due to internet use is substantial for local people.