The so-called digital economy has been growing exponentially in the emerging
economies and it is expected to continue growing around the globe. For this
reason, many governments are funding support programmes (e.g. Start-up
America in the USA, the UK’s Tech City, and Brazil Startup) to both encourage
and facilitate the creation of Digital Start-ups (DSs), defined here as recentlycreated
enterprises that produce solely digital products or services. Whilst in
some regions there is some evidence that these efforts are starting to pay off, the
majority of DSs that have grown to become global digital enterprises remain
concentrated in the United States and Europe. In the case of Latin America, the
digital economy already accounts for between 2-3.2% of GDP. Nonetheless, most
e-commerce transactions occur through platforms based in the United States,
with a scarcity of examples of Latin American DSs (LADSs) that have grown to
become large digital firms.
Despite this, the literature has paid little attention to the relationship that exists
between the institutional environment and LADS’s agency. The few extant studies
that do exist have focused on either institutional or infrastructure constraints and
public policies, or business models and resource analysis. To address this
knowledge gap, this research studied LADSs in the four largest Latin American
countries (Brazil, Mexico, Argentina, and Colombia), representing three-quarters
of the region’s GDP, in order to answer the following questions: How do
environmental pressures influence the development of LADSs? How do LADSs
respond to these pressures and seize potential business opportunities?
The research followed a critical realist philosophical foundation and was
operationalised through a qualitative exploratory field study of forty organisations,
including DSs, accelerators, investors, government agencies, and not-for-profits.
Geel’s (2014) Triple Embeddedness Framework (TEF) was chosen as the
theoretical framework to guide this research and integrates constructs from the
Lean Start-up method (LSM), which was widely adopted by the LADSs to develop
their business models.
This study provides empirical support for the constructs outlined in the TEF,
identifies crucial shortcomings in LSM, and uncovers new constructs that are
necessary to accommodate the DSs’ digital properties, which result in tensions
between their embeddedness in the institutional environment, their hybrid
embeddedness in a product-sector industry and a digital industry, and their
embeddedness in a multi-level organisational field that creates a core-periphery
relationship between Latin America and the United States.
Therefore, a new framework, entitled DIME, is proposed to assist e-entrepreneurs
when developing digital business models to achieve the right firm-environment-fit
in Latin America. The findings of this study will also contribute to future research,
and to guide policy makers interested in fostering the development of the digital
economy in emerging economies.