Transformative direction of innovation and measurement of uncaptured GDP in the digital economy

Abstract

The Internet has dramatically changed business dynamics and our daily lives by providing extraordinary services and welfare never anticipated before. However, productivity in industrialized countries has confronted an apparent decline. The ICT advanced firms and countries are suffering with low marginal productivity of their ICT investments. This reveals the two-faced nature of ICT and productivity paradox in the digital economy. With the progression of technology and transition from commodity- oriented to information society, the consumers’ preferences are believed to be shifted beyond economic value. The digitization has promoted the free and un- monetized consumption of digital goods and services that provides utility and happiness to consumers, but it cannot necessarily be captured through GDP (gross domestic product) statistics. This research conceptualizes it as “uncaptured GDP” and develops a new method for its measurement. The comparison of two ICT advanced countries reveals their contrary ICT-driven development trajectories, “happiness-oriented” in Finland versus “growth-oriented” in Singapore. It signifies how nations and industries use technology differently to create their unique competitiveness. The digitization of taxi and music industries is studied to analyze the impact of ICT-driven disruptive innovations on traditional industries and their consolidation challenges with institutions. The national level analyses explore useful insights for developing ICT-driven competitiveness through higher education (20 countries) and gender equality (44 countries) in the digital economy. These results reveals, how industries and countries are harnessing the potential of untapped and non-economic resources so-called “soft value innovation” to create unique competitiveness in the digital economy. With the analyses of transformative direction of innovation (by 500 ICT firms), it is anticipated that the role of soft value innovation will further increase in addressing the challenges of digital economy such as declining marginal productivity of technology, increasing role of uncaptured GDP and intense competition.