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Top1. Introduction
Small & Medium Enterprises (SME) are not only a source of over 50% of formally documented jobs in the world, but also are essential to the poorest countries in the world, such as some of those of Sub-Saharan Africa (SSA), where they serve as an important driver of economic growth that accounts for majority of all businesses (IFC, 2017). But while the SMEs of SSA are dominant players in their economies, they typically and often are not formally registered businesses (Fierro, 2015). This has two important implications. First, informal enterprises do not participate in the formal economy, and, second, they have a very limited access to finance (Fjose, Grünfeld, & Green, 2010). Both implications are important, but it is an access to finance that was identified as a critical factor for the survival and growth of SSA’s SMEs (Fierro, 2015). And it is by surviving, then growing, and then thriving, that SMEs contribute to a socio-economic benefit of any economy. Consequently, a chain of links “Legalization of SME → Obtaining Financing → Socio-Economic benefit of SME” seems to be present. In this chain the construct Legalization of SME represents a service that a government provides to its citizenry.
While the process of legalization of SMEs is directly impacted by the efficiency and effectiveness of a governmental apparatus, many economies do not do well in those areas (Kaufmann, Kraay, & Mastruzzi, 2010c) and could use some improvements (Blaug et al, 2006). Unsurprisingly, interventions aiming at increasing the efficiency and effectiveness of a government are common to most of the economies of the world. Such undertakings often rely on the practices and ideas of New Public Management (NPM), which is an approach to public service that provides guidance for making administrative systems more reliable, consistent, and efficient (Hood & Lodge, 2006).
One of the ways of implementing NPM is by adopting Information and Communication Technologies (ICTs) to create ICT Capabilities that reduce the cost and time of organizational activities (Cordella, 2006). It would appear then that the “ICT Capabilities → Legalization of SME” link is also worthy of investigation (WEF GITR, 2016), and especially in the context of SSA. Poorer economies have fewer resources to allocate towards ICT and they are more vulnerable to the consequences of inefficiency of utilization of investments. Also, there is evidence that ineffective and inefficient governance negatively impacts economic performance (Habtamu, 2008); thus, it is possible that the reverse is true and that ICT Capabilities-enabled provision of effective and efficient public services will have a positive impact on development of SSA economies.
Theory-wise, we draw a support for the presence of the link between ICT Capabilities and government services (of which Legalization of SME is one of the aspects) from the work of Samoilenko and Osei-Bryson (2019), who investigated the representation-based differences in the relationships between ICT Capabilities and Public Value provided by government services. While the authors reported that “subjective vs. objective” representation plays an important role in assessing the impact of ICT on government effectiveness and efficiency, in this study we concentrate only on objective, non-perception-based representation of Legalization of SME (Samoilenko & Osei-Bryson, 2019).
This support allows us to outline a conceptual chain of links that is the subject of this study, namely, “ICT Capabilities → Legalization of SME → Obtaining Financing → Socio-Economic benefit of SME”. Based on this chain of links the reader could see that in this investigation our interest is, fundamentally, in the social and macroeconomic outcomes of ICT.