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

This paper addresses the failure of major digital investments to achieve sustained technology adoption in developing countries, hindering their business growth. While existing research identifies institutional drawbacks as a key problem, it offers limited guidance on progress within these constraints. To address this gap, the new Institutional Framework for Smart Technology Adoption (IFSTA), pronounced Eye-f-sta, is developed as a contingent institutional framework connecting 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. Built around three core pillars, governance, socio-technical infrastructure, and adaptive capacity, the framework explains how their interactions shape adoption. Three questions are addressed: (1) how local conditions moderate infrastructure impact; (2) what workarounds enable progress amid fragile systems; and (3) how digital investments can be sequenced based on institutional starting points. A central insight is the critical role of localization, adapting standards, platforms, and partnerships to local context as a fundamental mechanism. Contributions are threefold: addressing the gap between diagnosis and implementation by developing effective guidance for developing economies; methodologically bridging static assessments with actionable diagnostics; and practically providing a structured framework and Performance-Knowledge Index (PKI) tool to diagnose contexts and prioritize interventions, moving from agnostic best practices to local strategies.