Digital innovation and entrepreneurship

Key issue: Lack of innovation capacity – advanced digital skills

To drive digital innovation and entrepreneurship, an economy relies on innovation capacity to invent and execute new ideas. This innovation capacity consists of both advanced digital skills (AI/ML, coding, blockchain, data literacy, etc.) as well as soft skills (leadership, entrepreneurship, etc.). Globally, these skills are scarce: an ITU study of 83 countries around the world found that 95 per cent of the countries have a population where 15 per cent or less of the population has advanced skills.[99] Looking closely at selected LDCs, LLDCs and SIDS, on average only 4 per cent of their populations have intermediate to advanced skills, as detailed in Figure 24. Beyond resulting in limited innovation, the lack of advanced digital skills could hinder the acceleration of new digital tools in society as there would be insufficient capacity to support growth. It is predicted that advanced digital skills will be a necessity for 75 per cent of jobs by 2030.[100] This emphasizes the urgency not only to upskill adults for innovation today but also to support and expand it in the future.

Potential intervention: Higher education curriculum and workforce upskilling

Key issue: Insufficient clarity on digital strengths at country level

Data-driven digitalization creates global opportunities as well as challenges that require global interventions to harness the positive developments and mitigate the negative impacts. Similarly, with regard to digitalization, countries have different strengths that can be leveraged (e.g. high capacity to support ICT, a thriving start-up ecosystem, willing investors in local digital technology, or data and insights on ICT and digital industries), and different weaknesses (e.g. insufficient ICT infrastructure, inequitable digital governance, or insufficient e-government). Understanding all of these is important for countries, especially when defining the areas of focus in national digital ecosystem strategies and plans. Owing to the lack of research and data on digital technology – particularly LDCS, LLDCs and SIDS – countries may not have accurate or sufficiently detailed insights on their strengths. This makes it challenging for countries to identify where they are best positioned to spark innovation and support entrepreneurship, and understand the strength of the relevant enablers (e.g. regulatory framework, ease of doing business). Without these perspectives, countries may struggle to define a roadmap and implement initiatives to grow their digital ecosystems and achieve tangible impacts.

As the data-driven digital economy has evolved, a data-related divide has compounded the digital divide. In this new configuration, developing countries may find themselves in subordinate positions, with the capture and control of data and their associated value being concentrated in a few global digital corporations and multinational enterprises. Hence, developing countries and their citizens risk becoming mere providers of raw data to global digital platforms, while having to pay for the digital intelligence obtained from their data.

Potential interventions:

Key issue: Unaffordable access and adoption for MSMEs

About 90 per cent of businesses worldwide are SMEs.[106] They account for more than 50 per cent of global employment.[107] Consequently, it is essential that MSMEs have affordable access to ICT and the Internet. Furthermore, MSMEs should be included in the innovation, expansion and enhancement of digital tools to maximize their growth and access to them. More specifically MSMEs and MSME entrepreneurs can lead the incubation, translation and dissemination of innovative technologies into replicable development interventions and employment generation. Yet MSMEs face barriers to accessing and adopting new digital technology such as limited access to sufficient financing, lack of personal finance and other feasible credit markets to allow for capital ownership and investments, inhibited access to global markets, challenges with public procurement, incoherent regulatory frameworks, and a lack of harmonized business ecosystems.

A lack of e-business capacities (e.g. tech savvy, entrepreneurial and communication skills, and digital business knowledge) hampers the adoption and effective use of digital technologies by companies and entrepreneurs. MSMEs in less developed and developing countries score much lower in the capacity to connect (specifically, on ICT access and ICT use) in comparison to developed economies, with Southeast Asia and sub-Saharan Africa recording the largest gap.

Potential interventions: Policy and effective partnerships

Key issue: Concentrated innovation and start-up ecosystems

Innovation is often stimulated in ecosystems of various stakeholders (e.g. entrepreneurs, start-ups, universities, accelerators, venture capitalists, governments, corporations) that produce new ideas and transform them into viable products and services. The presence of innovation and start-up ecosystems in a country is beneficial in driving the growth of its digital economy. However, both the top performing and top emerging ecosystems are concentrated in developed countries. Of the top 30 ecosystems, 50 per cent are located in North America, 27 per cent in Asia and 17 per cent in Europe while none are located in Africa or Latin America.[110] Approximately 67 per cent of emerging ecosystems are in North America and Europe, as illustrated in Figure 25. There is a clear dearth of performing ecosystems in the rest of the world, particularly in LDCs, LLDCs and SIDS.

Potential intervention: Committed multistakeholder collaboration/partnerships