The digital age is transforming everything: the nature of markets and products, how to produce, how to deliver and pay, the scale of capital to operate globally, and human capital requirements. It is also boosting productivity, exposing companies to new ideas, technologies, new management and business models, and creating new channels of market access. And all of this at relatively low costs. It is no exaggeration to predict that firms will increasingly rely on artificial intelligence for basic routines and for more complex tasks.
For digital technologies to impact economic development, however, appropriate policies have to be in place to remove the obstacles preventing emerging economies from fully engaging in the digital economy and optimising the benefits, while minimising the risks.
In this piece I discuss the relationship between the digital economy and economic development and explore the benefits and challenges for emerging economies. It identifies two sets of benefits: the so-called first- and second-order benefits. While the former are related to the direct, more visible, advantages of accessing and using digital technologies by consumers, firms, and governments, the latter are related to the less visible – but far more relevant – benefits related to developing, managing, and distributing digital technologies.
I make use of the concept of digital commoditization to help frame and examine those benefits and to identify the challenges that emerging economies may face as a consequence of this commoditization.
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