Digital economy

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Digital economy refers to an economy that is based on digital computing technologies. The digital economy is also sometimes called the Internet Economy, the New Economy, or Web Economy. Increasingly, the "digital economy" is intertwined with the traditional economy making a clear delineation harder.


The term 'Digital Economy' was coined in Don Tapscott's 1995 best-seller The Digital Economy: Promise and Peril in the Age of Networked Intelligence.[1] The Digital Economy was among the first books to show how the Internet would change the way we did business. It became an international best-seller within one month of its release, appearing on a number of best-seller lists, including the New York Times Business Book list and a seven-month run on the BusinessWeek best sellers list. BusinessWeek also named The Digital Economy the top selling business book for 1996.[2]

According to Mesenbourg (2001),[3] three main components of the 'Digital Economy' concept can be identified:

  • supporting infrastructure (hardware, software, telecoms, networks, etc.),
  • e-business (how business is conducted, any process that an organization conducts over computer-mediated networks),
  • e-commerce (transfer of goods, for example when a book is sold online).

But, as Bill Imlah[4] comments, new applications are blurring these boundaries and adding complexity – for example, social media, and Internet search.

In the last decade of the 20th century. Nicholas Negroponte (1995) used a metaphor of shifting from processing atoms to processing bits.[5] He discussed the disadvantages of the former (e.g., mass, materials, transport) and advantages of the latter (e.g., weightlessness, virtual, instant global movement). In this new economy, digital networking and communication infrastructures provide a global platform over which people and organizations devise strategies, interact, communicate, collaborate and search for information. More recently,[6] Digital Economy has been defined as the branch of economics studying zero marginal cost intangible goods over the Net.


It is widely accepted that the growth of the digital economy has widespread impact on the whole economy. Various attempts at categorising the size of the impact on traditional sectors have been made.[7][8] The Boston Consulting Group discussed “four waves of change sweeping over consumer goods and retail”, for instance.[9] Deloitte ranked six industry sectors as having a “short fuse” and to experience a “big bang” as a result of the digital economy.[10] Telstra, a leading Australian telecommunications provider, describes how competition will become more global and more intense as a result of the digital economy.[8]


Given its expected broad impact, traditional firms are actively assessing how to respond to the changes brought about by the digital economy.[11][12][13] For corporations, timing of their response is of the essence.[14] Banks are trying to innovate and use digital tools to improve their traditional business.[15] Governments are investing in infrastructure. The Australian National Broadband Network, for instance, aims to provide a 1 GB/sec download speed fibre based broadband to 93% of the population over ten years.[16]

See also


  1. Tapscott, Don (1997). The digital economy : promise and peril in the age of networked intelligence. New York: McGraw-Hill. ISBN 0-07-063342-8.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  2. "Don Tapscott Biography". Retrieved 24 October 2013.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  3. Mesenbourg, T.L. (2001). Measuring the Digital Economy. U.S. Bureau of the Census.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  4. "The Concept of a "Digital Economy"". Retrieved 30 March 2015.<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  5. Nicholas Negroponte - Bits & Atoms - University of Phoenix. Retrieved on 2013-07-23.
  6. "Merchant Sharing" (PDF).<templatestyles src="Module:Citation/CS1/styles.css"></templatestyles>
  7. The New Digital Economy - How it will transform business, Oxford Economics
  8. 8.0 8.1 Taking leadership in a digital economy, Deloitte Digital
  9. Digital’s Disruption of Consumer Goods and Retail. bcg.perspectives (2012-11-15). Retrieved on 2013-07-23.
  10. Deloitte Australia: Digital disruption - Short fuse, big bang?. Econsultancy (2012-10-22). Retrieved on 2013-07-23.
  11. Internet matters: Essays in digital transformation | McKinsey & Company. (2013-03-13). Retrieved on 2013-07-23.
  12. Welcome to Telefónica Digital. (2013-07-15). Retrieved on 2013-07-23.
  13. Economy is better off with digital disruption. (2012-07-23). Retrieved on 2013-07-23.
  14. Being too late in digital more costly than being too early: Deloitte Telstra joint report. Computerworld (2012-11-30). Retrieved on 2013-07-23.
  15. Retail banks to tackle “digital disruption” in 2013. CCR Magazine (2012-11-21). Retrieved on 2013-07-23.
  16. What is the NBN? | NBN - National Broadband Network - Australia. NBN. Retrieved on 2013-07-23.

Further reading