Further, this paper also contributes to the wider literature on firms’ technology adoption. In particular, it contributes to recent studies that highlight the role played by value-chain linkages on technology adoption.<sup>5</sup> For instance, Almeida and Fernandes (2008) find that trade linkages are important channels for the transfer of technology. Firms that import intermediate inputs tend to acquire new technology from their machinery suppliers. Giunta and Trivieri (2007) use a sample of Italian firms and find that subcontracting, exports, and collaboration between firms are all significant determinants of ICT adoption. Other studies, such as Haller and Siedschlag (2011) and Grazzi and Jung (2019), demonstrate that larger, skill-intensive, and exporting firms are more likely to adopt ICT.

Lastly, this paper contributes to the literature on the implications of interactions—either through subcontracting or geographical clustering—between informal and formal firms.<sup>6</sup> Thus far, the evidence suggests that interactions with formal firms bring benefits to informal businesses (or workers), but the size of the benefits depends on the informal businesses’ existing productivity level and absorption capacity. For instance, Moreno-Monroy, Pieters, and Erumban (2014) find that subcontracting with formal firms, which is also a form of a value-chain linkage, is positively related to employment growth in the most modern segments of the informal sector. Chhair and Newman (2014) show that <mark>geographical clustering of formal and informal firms generates</mark> productivity spillovers from formal firms to informal businesses in Cambodia. In contrast, Tran and La (2018) demonstrate that informal businesses in Viet Nam experience negative externalities of co-location with formal firms in terms of productivity, largely due to the lack of absorption capacity in the informal sector. In addition, Ramachandran and Sasidharan (2021) find a

> 5 Other factors that can contribute to firms’ technology adoption include firm capabilities (including workforce quality; entrepreneurial ability and learning), linkages to FDI, access to finance, product market competition, access to infrastructure, and intellectual property rights policy. See Acemoglu and Akcigit (2012), Cirera and Maloney (2017), Cirera et al. (2022), Delera et al. (2022), and Verhoogen (forthcoming) for supporting evidence and reviews. At the country level, theory and empirical studies underscore the following factors that contribute to the speed at which a country adopts technologies: the country’s human and physical capital endowment (e.g., Chari and Hopenhayn 1991, Brezis, Krugman, and Tsiddon 1993; Basu and Weil 1998), type of government (or government capabilities; Cirera and Maloney (2017), degree of patent protection (e,g., Zheng, Huang and Yang 2020), and adoption of predecessor technologies (Comin and Hobijn 2004).

> 6 There are some studies analyzing value-chain linkages between formal and informal firms. For instance, Böhme and Thiele (2014) combine household and enterprise surveys from six West African countries to study value-chain linkages between formal and informal firms. They find evidence that informal firms are more likely to purchase goods from formal firms (i.e., backward linkage).

4