Impacts of ICT and innovation on economic growth in advanced countries

Abstract

In the recent decade, the application of information communication technology (ICT) among governments, companies and individuals has kept forward at an accelerating speed. Furthermore, innovation enhances the implementation of new strategies and ideas. Hence, a healthy ecosystem with information communication technology and innovation are the key catalysts for improving economic growth. However, innovation is usually created by bounded exploration of new technologies through a trial-and-error procedure that causes substantial uncertainty. The objective of this study is to examine the impacts of ICT and innovation on growth in advanced countries. This study employs a comprehensive dataset that includes five sub-components for ICT indicator and six sub-components for innovation indicator. By using panel regression random effect model and the data from 27 advanced countries spanning from 2001 to 2018, the robust results showed that the overall impacts of ICT and innovation are positive and statistically related to economic growth. Nevertheless, the sub-indicators, namely individuals using the internet (-0.077) and patent applications from residents (-0.088) exert negative and significant relationship with economic growth. The implication of the present study highlights that the internet may harm economic development, possibly due to cybersecurity risk. Besides, patent applications are usually filed by the wealthiest individuals and the benefits are concentrated in the hands of capitalists, it may cause unequal sharing of national wealth that hampers economic development. Therefore, the policymaker should ensure the effective usage of these contemporary ICT applications and equal sharing of opportunities for innovation in improving sustainable economic growth.