manufacturing sector survey have a graduate (B.A.) or higher degree, as opposed to 79 percent of the owners/managers of the businesses selling on Chaldal. More than 90 percent of the firms in the Bangladesh manufacturing sector survey are managed by the owner or their family, in comparison to 82 percent of Chaldal sellers. Thus, firms selling on Chaldal have higher levels of managerial education and a lower prevalence of family management than typical manufacturing firms in Bangladesh.

Given the small average size of Daraz sellers, a recent representative survey of family business in India may be an appropriate comparison sample for the Daraz survey.<sup>20</sup> In India, among family businesses with at least one hired worker, only 25 percent of the owners have tertiary (above senior secondary) education. In comparison, the majority of Daraz sellers have tertiary education. The average age of the owners of Indian family businesses is about 45 years, compared to 30 years in the case of Daraz sellers. Daraz sellers may be small, but they are a highly educated and youthful subset of small business owners in South Asia.

# **6 Conclusion**

The quantitative case studies presented in this paper have contributed to the scant evidence base on the ways in which selling on e-commerce platforms impacts small firms in developing countries. The main channel of impact highlighted by the surveys is the greater access to product markets enabled by the reduction in transactions costs. This finding is significant in light of the growing evidence that there are important demand-side constraints to firm growth, such as the high costs of gaining initial market access (Atkin and Osman (2017)) and slowly building a customer base (Foster and Syverson (2016)). The case studies also suggest that this easing of demand-side constraints to growth increases e-commerce sellers’ incentives to formalize and undertake complementary changes to business practices and technologies. Strikingly, micro and small-sized firms from the informal sector report these benefits to the same extent as do medium to large-sized formal firms.

The case study approach used in this paper has helped assess the potential mechanisms through which firms are able to reap benefits from using e-commerce platforms. But being based on the subjective reports of e-commerce sellers and lacking a control group, this approach is not suitable for causal impact evaluation. Our findings thus highlight the need for more quasi-experimental or experimental research into estimating the impacts of e-commerce on firms in developing countries.

The selective use of e-commerce by firms in South Asia is also worth stressing. This issue is not limited to e-commerce platforms. Interviews with other types of digital platforms that facilitate business to business (B2B) transactions also suggest that for a number of reasons, their usage is concentrated at the upper end of the spectrum of small firms. For example, Power2SME, a B2B platform in India that aggregates orders of raw material for small firms, requires firms to have a turnover of at least 50 million Rupees, a threshold well above the revenue of most small informal firms. This is because aggregating orders when each order size is very small is prohibitively costly even with the digital platform technology. In addition, a key reason highlighted for the lack of use of the platform is that a majority of small firms prefer to purchase their raw materials through informal networks. This would remain a (transactional) barrier even if a platform such as Power2SME were to offer subsidized logistics, delivery services and access to financing. In fact, Power2SME has an active strategy of outreach to SMEs and microenterprises: it identifies industrial belts in the country

> 20The World Bank COVID Module of the Center for Monitoring the Indian Economy (CMIE) Consumer Pyramids Household Survey (CPHS), January-April 2021 wave.

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