The Concept of a ‘Digital Economy’

By | September 2, 2013
As part of our background research in relation to the Digital Economy, we’ve been looking at how to define it, how widespread it is, and what trends and advantages organisations are reporting. We are posting blogs on some of our working notes on the topic, beginning with a brief set of observations on the very concept of a ‘digital economy’.

There are two very general points that might be useful for us to receive feedback on.

First, the idea of a ‘digital economy’ is a departure from concepts that have been prominent in the literature since the 1960s, primarily around Daniel Bell’s concept of an ‘information economy’, (1974) tied to the codification of information, and later, Manuel Castells’ extension (1996) of Bell’s work to frame his notion of a ‘network society’ or ‘network economy’ tied to the centrality of networking information and people. In relation to these terms, the digital economy appears to be more anchored in a shift in technology, and not necessarily tied to the ideas embedded in an information or network economy. Is this the case? Is it a consequence of its origins in the computer sciences rather than the social sciences? We would value any steer on the origin of the terminology and why it departs from more developed concepts in the social sciences.

Secondly, there does not seem to be widespread agreement on the definition of a digital economy, or for that matter, the concept of the digital versus Internet economy. There is no clear cut agreement on what the term covers, which is not necessarily a problem if we accept a very open and broad definition.

One definition is “an economy based on digital technologies”, but this then leads to further questions such as what it means to be “based on”. Other terms include Internet Economy, New Economy, and Web Economy, which some writers used in a similar sense or interchangeably.

According to Mesenbourg (2001), 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 new applications are blurring these boundaries and adding complexity – for example, social media, and Internet search.

Importantly, with the ubiquitousness of digital technologies and Internet access, the distinction between the Digital Economy and the traditional economy is becoming increasingly difficult to maintain. To help, some writers, using the term digital economy business, find it useful to classify these as either “indirect” – making use of digital technology in some way, or “direct” – a company whose business is entirely online. All of these issues have been dealt with at length in the literature on the information economy, which again raises questions around why this shift of terminology.

We hope this posting helps stimulate debate and engagement. It represents one in a series of work in progress, and any feedback would be very welcome, by comment or email.

Bill Dutton & Bill Imlah

Thanks to our students Elizabeth Dubois, Gillian Bolsover and Heather Ford, who helped conduct, review and collate this research.


Bell, D. (1974), The Coming of Post-Industrial Society: A Venure in Social Forecasting. London: Heinemann; originally published, New York: Basic Books.

Castells, M. (1996), The Rise of the Network Society: The Information Age: Economy, Society and Culture. Oxford: Blackwell Publishers.

Mesenbourg, T.L. (2001) Measuring the Digital Economy, U.S. Bureau of the Census.