An analysis of the impacts of telecommunications technology and innovation on economic growth

Abstract

© 2020 Elsevier Ltd Recently, the idea of ICTs being ‘mainstreamed’ in sustainable economic development has been adopted by many countries. For any country, sustainable economic growth is essential for a steadfast and well-balanced development of the entire country. One of the important factors supporting sustainable economic growth is the telecommunications technology and innovation, considering their role and functions as a modern-day indispensable infrastructure. It provides an opportunity for economic development compatible with the safeguard of the environment. Therefore, this study examines whether and to what extent telecommunications technology and innovation have helped improve the economic growth of developed and developing countries. We also aim to investigate the non-linear or kink effect in the relationship between the variables of telecommunications technology and innovation and economic growth. This study analyzes the impacts of telecommunications technology and innovation on economic growth at two different levels. First, we investigate the impact on individual countries which are distinct from one another regarding the level of economic development and the physical structure. Besides, the relationship between telecommunications development and the economic growth of a country may not be linear in the structure which necessitates our use of the kink regression model to capture and explain it. Second, this relationship is later investigated at the group level of countries. We divide the countries into two groups, developing and developed, based on the level of economic development and telecommunications technology. Empirically, we find that (Adak, 2015): there exists the kink effect on the relationship between telecommunications development and the economic growth in both developed and developing countries (Agnew & Romeo, 1981), the impacts of some related variables differ in magnitude depending on their levels and kink points, and (Alshubiri et al., 2019) the telecommunications technology and innovation give a relatively more massive impact on the economic growth of developing countries compared to developed countries.