Internet diffusion and economic growth in emerging stock markets

This paper analyses the process of internet diffusion and economic growth using a dataset of 116 low and lower middle income countries during 1990 to 2004. The countries are stratified by those with (without) stock exchanges and show that the internet diffusion process is characterised by an S-shape curve for both groups. Countries with stock exchanges show a steeper diffusion curve and have higher growth patterns than those without. The paper further explores the relation between internet diffusion and economic growth at the country and firm levels. The findings show this relation to be significant in countries where investor protection, trade, and governance are increasing and where market liquidity and foreign equity holders are higher relative to others.