Can Information and Communication Technologies Make a Difference in the Development of Transition Economies?

Abstract

This article investigates the potential of information and communication technologies (ICT) for faster convergence of seven transition economies from Central and Eastern Europe (CEE) and Russia (CEER) with the EU-15 and the U.S. income level. First, the article argues that ICT accelerated the convergence of the four new EU member states with the EU-15 (the case of technological leapfrogging) but decelerated convergence of Romania, Russia, and, to a lesser extent, Bulgaria and Slovakia (the case of a growing digital divide). This divergence was mainly because of the lower quality of the economic and institutional environment, which inhibited the diffusion of ICT. Second, the article shows that ICT has a large potential to increase long-term growth in transition countries. Third, it argues that the use of ICT has an important role in stimulating productivity growth at the industry level and that it offers considerable potential for faster productivity growth in non-ICT-using, "old economy" industries. Realizing this potential, however, will crucially depend on far-reaching structural reforms, business reorganization, investment in human capital, and well-designed public "push strategy." These lessons are pertinent not only to transition economies, but also to most advanced developing countries. (c) 2006 by The Massachusetts Institute of Technology.

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“…The economic liberalisation since the early 90ies exposed transition economies to increased competition and globalisation (Gertha & Rothman, 2007;Harindranath, 2008) while facing specific local conditions resulting from both environmental/market and internal/organisational factors (Huang & Palvia, 2001). Information and Communication Technology (ICT) is regarded by many as an opportunity and catalyst for change in transition economies (Murugesan, 2010), but there is scarcity of literature on ICT issues in these post-communist, transition economies (Piatkowski, 2006). More specifically, it seems important to understand if and why the specific situation in transition economies impacts on a firm's progress and success in IT adoption in their attempt to increase productivity, engage in collaborations, and shift to highvalue adding activities.…”

Advertising and Internet Content Providers: Creating a Market for Information

“…Research has shown that Information and Communication Technology (ICT)-related productivity growth in Russia and 94 D. A. Kopf et al Romania and, to a lesser extent, Slovakia and Bulgaria between 1995 and 2003 lagged behind the EU-15 because of structural problems and the digital divide (Piatkowski 2006). The Czech Republic, Hungary, Poland, and Slovenia experienced ICT-related productivity growth that helped their economies converge with more developed economies (Piatkowski 2006).…”

“…Kopf et al Romania and, to a lesser extent, Slovakia and Bulgaria between 1995 and 2003 lagged behind the EU-15 because of structural problems and the digital divide (Piatkowski 2006). The Czech Republic, Hungary, Poland, and Slovenia experienced ICT-related productivity growth that helped their economies converge with more developed economies (Piatkowski 2006). Additional research has found that the positive impact of the Internet on growth can be enhanced by income redistribution aimed at reducing the digital divide (Noh and Yoo 2008).…”