Institutional Conditions for Digital Innovation and Transformation: A Contingent Framework for Smart Technology Adoption in Developing Nations

This paper addresses the persistent failure of major digital investments to achieve sustained smart technology adoption in developing countries, limiting productivity and business growth. Although existing research identifies institutional weaknesses as a central barrier, it provides limited guidance on how progress can occur within such constraints. To address this gap, the Institutional Framework for Smart Technology Adoption (IFSTA), pronounced Eye-f-sta, is developed as a contingent institutional framework linking digital transformation theory with practical assessment tools. IFSTA argues that adoption success depends not on technology alone, but on strategic alignment with specific institutional contexts. The framework is built around three core pillars, governance architecture, socio-technical infrastructure, and adaptive capacity, and explains how their interactions generate differentiated adoption outcomes across five institutional contexts. Localization is conceptualized as a cross-cutting mediating mechanism through which governance arrangements, standards, platforms, and capabilities are adapted to domestic realities, shaping both current performance and future transformation potential. Three questions guide the analysis: how institutional contexts moderate the impact of infrastructure investment; what complementarities and compensatory mechanisms enable progress under institutional constraints; and how digital investments can be sequenced according to institutional starting points. To operationalize this logic, the Performance–Knowledge Index (PKI) is introduced as a context-sensitive diagnostic tool that identifies binding constraints and supports sequenced intervention design. The study contributes a contingent institutional model, a methodological bridge between diagnosis and implementation, and a structured, actionable framework for advancing sustainable digital adoption in developing economies.