High levels of digital engagement are associated with increased levels of innovation.
The internet and mobile computing have decreased barriers to entry for new businesses and product launches. This has been achieved by turning some fixed costs into variable costs; reducing the need for physical space, reducing the cost of providing information, lowering search costs; creating new distribution channels and economies of scale; and allowing for disintermediation of sales. The internet has allowed new entrants to raise awareness for their brand, connect with customers in multiple locations and establish quality and reputation at a fraction of the historical cost of these objectives. This has encouraged innovation and efficiency, which has lead to a greater diversity and higher quality of product offerings (NERA 2014).
Government institutions are also found to be using the Internet for the purposes of innovation. For example in Norway’s region of Tromsø, the “Norwegian Centre of Integrated Care and Telemedicine” incorporates Internet use in its medical care. The “World Opera Project” uses the Internet for complex music interaction in their productions. The Internet is also used to attract tourists through the circulation of online content about the region. It is estimated that Tromsø's economy would be 10% lower today if the Internet did not exist (DAMVAD 2013).
Such enhanced levels of innovation bring tangible benefits to the overall economy. Tech start-ups have the potential to generate $109 billion and contribute 540,000 jobs to the Australian economy by 2033 (PriceWaterHouseCoopers 2013). Widespread cloud adoption in Australia offers great opportunities to improve technology adoption and innovation among SMEs as it is a cheaper and more flexible technology than traditional IT (Grattan Institute 2014).
There are a number of Internet-focused strategies which countries can pursue in order to encourage innovation. For example, further investment into the ICT sector promises improved economic performance and the creation of new business. In Greece, SME ICT adoption promises to increase the probability of innovation by up to 9 percentage points (The Foundation for Economic and Industrial Research 2014). In Sweden, technological innovation and entrepreneurship among SMEs shows strong growth potential through the removal of barriers to entry, improved incentive structures and enhanced access to capital (Boston Consulting Group 2015).