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2019
Vol.19 No.2
POLISH JOURNAL OF MANAGEMENT STUDIES
Afonasova M.A., Panfilova E.E., Galichkina M.A, Ślusarczyk B.
22
DIGITALIZATION IN ECONOMY AND INNOVATION: THE
EFFECT ON SOCIAL AND ECONOMIC PROCESSES
Afonasova M.A., Panfilova E.E., Galichkina M.A, Ślusarczyk B.
Abstract: Digital technology has significantly changed the speed of operation in the
economy. The Internet and digital devices are a driver of economic growth. This article
analyzesthe Russian digital economy and society in the context of comparison with EU
countries and draws conclusions regardingfuture development trends. Based on secondary
data from the European Commission, this studytackles five components of the Digital
Economy and Society Index.It includesICT Development Index, Global Innovation Index
(GII), Networked Readiness Index, Share-Households with Internet, and High-Technology
Exports. A cross-country analysis reveals significant differences between Russia and the
EU countries in terms of Internet accessand Digital Economy,and their impact on GDP and
social processes that take place in the country. Findings show that Russia holds a position
among the top ten countries inICT Development Index and Network Readiness Index. The
growth rate of high-tech exports indicatesthe lag of Russia behind other countries in the
ranking.According to the ranking of countries by high-tech exports, Russia lags in the
production of products with high R&D intensity, such as aerospace products, computers,
pharmaceuticals, scientific instruments and electrical machinery. Russia holds a strong
position in National Cyber Security (63.64%), as well as in the Share of Households with
Internet.
Keywords: digitalization,innovations, Russian Federation,digital economy
DOI: 10.17512/pjms.2019.19.2.02
Article’s history:
Received February 21, 2019; Revised May 12, 2019; Accepted May 28, 2019
Introduction
Growth of Information and Communications Technology (ICT) use has increased
significantly over the past three decades (Castellacci and Tveito, 2018; Nagy,
2019). Digital economy refers to a system of institutional categories (concepts) that
comprises high-level achievements and progressive technologies, primarily digital,
Margarita A. Afonasova, Doctor of Economic Sciences, Head of the Departmentof
Management, Tomsk State University of Control Systems and Radioelectronics, Tomsk,
Russia, Elena E. Panfilova, PhD in economics, docent, Department of Management
Organization in Engineering, State University of Management, Moscow, Russia; Marina
A. Galichkina, PhD in economics, docent, Department of Organization Management in
Machinery Industry,State University of Management, Moscow, Russia, Beata Ślusarczyk,
PhD, assoc. professor; Faculty of Economic and Management Sciences, North-West
University and The Management Faculty, Czestochowa University of Technology,
Czestochowa, Poland;
Corresponding author: helena_panfilova@mail.ru
afonasova@yandex.ru; marika18@mail.ru; beata.slusarczyk@wz.pcz.pl
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and serves to increase the effectiveness of social production (Johnson, 2019;
Pradhan et al., 2019; Peshkova and Samarina, 2018).At the same time, digital
economy refers to an economy based on professional and market knowledge,
creativity and an innovation society (Balcerzak and Pietrzak, 2017; Quinton et al.,
2018).
The EU member states are on the move towards a digital economy. Nevertheless,
there is a significant development gap between different countries, which is the
lack of harmonizedrelationship between the level of digital technology
development and the time taken for introducing digital technologies into industrial
and business spheres (Galichkina, 2014). Europe’s policy to build a faster and
better digital economy can thus be said to mix mercantilism, competition policy,
and the Digital Single Market reform strategy. It is revealing that current initiatives
are so focused on perceived barriers to digital growth from either direct digital
policy or the (superior) performance of foreign companies (Bauer and Erixon,
2016). EU’s most pressing structural impediment for digital businesses to develop
and reach scale is regulatory heterogeneity in non-digital industries.
Intelligent products, connectivity and big data analytics are expected to be
disruptive for companies’ business strategies and operational execution (Ardolino
et al., 2017). When it comes to digital technology, industrial companiesbecome
active investors (World Investment Report, 2018).The British–Dutchconglomerate
Unilever Plc grew revenues by investing in fast-growing opportunities and start-
ups, including digital tools and platforms. The most recent entry, Tencent, has
transformed into a very active investment holding conglomerate with a recent
special focus on financing Asian tech start-ups. In the past year alone, it more than
trebled its international assets, entering the Top 100 global multinational enterprise
ranking for the first time. The semiconductor company Broadcom acquired
competitors continuously over the past five years until last year’s hostile bid for
United States chipmaker Qualcomm (World Investment Report, 2018).
The digital transformation of EU business and society presents enormous growth
potential for Europe. European industry can build on its strengths in advanced
digital technologies and its strong presence in traditional sectors to seize the range
of opportunities that technologies such as the Internet of Things, big data, advanced
manufacturing, robotics, 3D printing, blockchain technologies and artificial
intelligence offer (Crabtree et al., 2016; Karnitis and Karnitis, 2017). Despite the
progress, the economy and society of Europe need to make the most of digital. 47%
of the EU population is not properly digitally skilled, yet in the near future, 90% of
jobs will require some level of digital skills (Boban, 2016). In common use modern
technologies came in countries witha high level of GDP among the working
population. At this point, the article analyzesthe Russian digital economy and
society in the context of comparison with EU countries and draws conclusions
regardingfuture development trends.
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Literature Review
In conditions of digitalization of the economy, it is impossible to achieve success in
business;youalways have information about personal prospects and opportunities,
the quality and condition of the target markets, and the position of competitors on
them (Panfilova, 2008; Vertakova et al., 2019).
The adoption of digital technologies becomes a unique industrial policy
goal,andthe failure to pick up this challenge could have wide-ranging
economicconsequences (Gruber, 2017). The digital economy is comprised of
markets based on digital technologies that facilitate the trade of goods and services
through e-commerce. The expansion of the digital sector has been a key driver of
economic growth in recent years, and the shift towards a digital world has had
effects on society that extend far beyond the digital technology context alone
(Balcerzak and Pietrzak, 2017). The five main attributes of the digital economy:
Digitized and Tracked, Connected, Shared, Personalized and Direct (Richter et al.,
2017).
The digitalisation of day-to-day activities has dramatically increased the amount of
data available.It creates extremely large and complex data sets,commonly referred
to as “Big Data”. Big Data could also potentially be used for internal risk
management and outside monitoring of financial services and institutions and thus
make supervision more efficient (Adamczewski, 2016; Chauhan et al., 2016;
Dorofeyev et al., 2018).
Innovative applications of digital technology for financial services, or Fintech, are
being used to alter the interface between financial consumers and service providers
and are helping to improve communication with consumers and increase their
engagement (Keller and Hott, 2015). Electronic currencyserves as one of the
essential infrastructure elements of the digital economy (Pshenichnikov, 2017;
Vovchenkoet al., 2017).
Note that the digital economy is still in the middle of formation, soany effects on
productivity will occur only withdeveloped digital technology. Productivity in
industrialized countries now confronts an apparent decline raising the question of
apossible productivity paradox in the digital economy (Gorelova, 2016; Watanabe
et al., 2018). Conceived around new technologies, the FinTech companies are
typically highly flexible, adept at the swift incorporation of change and tend to
have a low-cost structure. In most cases, they also exhibit sharply redefined
business models, which are highly disruptive to traditional paradigms (Cuesta et
al., 2015; Rayna and Striukova, 2016).
Issues concerning the limitation of GDP statistics in measuring the advancement of
the digital economy became crucial. The digitalization of economycreates
challenges for measuring international transactions and assets, as well as the scope
of works and services (Ahmad and Schreyer, 2016; Cockayne, 2016).Another
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postulated aspect is the concept of uncaptured GDP (Watanabe et al., 2018). To
address the limitation of using GDP statistics in the digital economy,
certaindevelopments, associated with the presentation and transformation of GDP
accounting approaches,were made.
The digital economy is analyzed in four criteria (Semjachkov, 2017): employment
sector,penetration rate,technology, and the value factor. Whena decline in the
proportion of people employed in the production sector occurs at the same time
with the increase in the proportion of people employed in the services sector,and
physical laboris assumed to be replacedwith its mental form. Given the rapid
growth in the number of trade workers, lawyers, etc. (those who fall under one
category, mental labor), such data, as they are,are not a characteristic to the level of
digital sector development. Penetration rate refers to data networks that connect
different places and therefore, may have an impact on the global economic space
formation. Data networks are a thing specific to modern society. Large amounts of
data and the speed of their transfer are those elements that speak for the transition
to a digital economy. The value factoris a condition related to the growth of
economic value of data creation, transfer, processing, and storage. If such a
growing trend is more evident in the economic realm than in agriculture and in
production, then a transition is assumed. Moreover, such settings make data an
object of economic relations. The emergence of new technologiesis first to indicate
a change in the economic systems, not to mention their reputation as the drivers of
economic development.
Although digitalization is a rapidly developing sphere of national interest and has
its advantages, scientists differ over this policy direction. Mostafa et al. (2019)
believe reducing human intervention and making everything connected increase the
efficiency and save time, hence save money. Implementing IoT in industry can lead
to economic and social transformation; a 10% rise in the number of connected
machines and objects can lead to an annual increase of 0.7% in GDP. Grabara et al.
(2014) illustrated the role and impact of information systems on transportation
activities in the economy, such as improving the efficiency of the transportation
process, better drivers’ utilization, more efficient information exchange, and better
financial results. Technology adoption is always a difficult task for Small and
Medium-sized Enterprises due to lack of resources and other market issues
(Haseeb, 2019). The author identifies the role of Industry 4.0 to promote
sustainable business performance in Small and Medium-sized Enterprises. As
indicated, the elements of Industry 4.0, such as big data, Internet of Things and
smart factory have a positive role in promoting information technology (IT)
implementation, which contributes to sustainable business performance. Despite
the positive trend of digital economy and IT implementation, there is also a range
of risks and costs that unduly affect the livelihoods of digital workers (Graham,
2017).The pace of digital economic development raises many questions. In Russia,
economic transformations occur and develop fast,but criteria reflecting the quality
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of these transformations should be adapted to that in countries with positive
digitalization.
Methods
For analysis, indicators were selected through the statistical analysis of reports
(The Organisation for Economic Co-operation and Development).The data was
processed using the score growth rates over the years. Indicators that were up with
given criteria were selected from those verified for compliance and then listedas
indicators characterizing the level of digital sector development. Such indicators
include those thatare often used, do not require the involvement of experts, can be
calculated without details, thosegive a general picture of digitalization, those allow
identifying the weak points, assessing digitalizationprogress over time, and
conducting a comparative analysis.
To analyze the level of digitalization level in Russia, this study addresses five main
indexes: ICT Development Index, Global Innovation Index (GII), Networked
Readiness Index, High-Technology Exports (% of manufactured exports).
To identify differences in similar indicators between European countries and
Russia,data from available benchmarking statistics are analyzed. The goal of this
process is to seek improvements in the aspects that are being compared. The
analysis resulted in two isolates, in spheres, where Russiais successfully advancing
on digital development and spheres that need a boost.
Statistical analysis was performed using the Statistaca 10, and the graphs were
created in Origin 9.0. Score growth rates were determined in the 2014-2018
Global Innovation Index, and the 2011-2018 High-Technology Exports. The
comparative analysis involved the 2018 data on the Share of Households with
Internet, the Global Innovation Index, and the High-Technology Exports (% of
manufactured exports) in Russia and European countries.
Results and Discussions
Ranking of countries by the level of innovation was performedusing the score
growth rates in the GII (Table 1). Leaders from the year of 2017 remain at top
positions. However, Netherlands overstepped Sweden, while Russia lost more than
2percent. In hindsight, this tendencyreoccurred. Imagine the pattern: Russia holds
its position for a long period, with makingscoreimprovements or not, but then a
crisis occurs, throwingthe country down several ranks (Measuring the Information
Society Report, 2018). A crisis can open opportunities for development,but they
remain unused, so the dropping-down-in-rank trend becomes the new norm.
Table 1. Global Innovation Index: score growth rates
2017/2018
2017/2016
2016/2015
2015/2014
Russian Federation
0.58%
0.68%
-2.04%
0.41%
Finland
0.76%
-2.35%
-0.17%
-1.10%
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Germany
0.83%
0.78%
1.47%
1.93%
Norway
-0.99%
2.17%
-3.33%
-3.22%
Netherlands
1.001%
8.70%
-5.37%
1.67%
Switzerland
0.98%
2.13%
-2.96%
5.43%
According to the ranking of countries by high-tech exports,Russia lags in the
production ofproducts with high R&D intensity, such as aerospace products,
computers, pharmaceuticals, scientific instruments, and electrical machinery
(Mostafa et al., 2019). Russian exports are mainly raw materials. In 2018,
metallurgical and chemical industries together with minerals accounted for 66.8
percent of exports, and thosewere intermediate goods from low technology, while
the share of high-tech exports in total Russian exports was only 10.7%.
Figure 1 shows the scores of Russia and Europe in the ICT Development Index and
the Networked Readiness Index. In 2018, Russia dropped to 45th place in ICT
Development Index. Despite the set to information society development (Petrenko
et al., 2017; The Presidential Decree, 2017), Russia is still catching up with the
advanced countries in the Networked Readiness Index (41st position) (The Global
Information Technology Report, 2016) and in the IDI, wheretop spots were
occupied by Finland, Singapore, Norway, Netherlands and Switzerland in 2016,
when Russia ranked 2 positions behind.
Figure 1. ICT Development Index and Networked Readiness Index: Russia vs Europe
In the Share of Households with Internet, European countries reached a level of
80% and higher. In 2018, the percentage of those with Internet access across the
EU averaged 87 percent. The Netherlands took the leading position in the Internet
penetration among the EU countries,but Luxembourg, Denmark, Sweden, Finland,
and the UKalso reported rather high figures. In listed countries, the proportion of
households with Internet was over 90 percent, so it was the rate of broadband
Internet penetration. The Russian Federation reported 74.8 percent of connections
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tops. This figureindicates the presence ofinfrastructuresuitable for digital
technologies.
Figure 2. The Share of Households with Internet, Global Innovation Index, High-
Technology Exports: Russia vs Europe
Thus, broadband penetration across Russia will enable the use of digital services in
many spheres. This allows stores, salons and services to conduct cashless
payments, reduces the cost of printing money, and contributes to the formal
economy. The digital realm can generate new jobs across the country. However,
Russia is lagging in certain aspects of digitalization.
Russia holds a strong position in National Cyber Security (63.64%). The leading
countries are France, with 83%, and Germany,with 83.12%.Russia moved ahead of
the СIS countries, specifically Kazakhstan and Uzbekistan. The index has been
developed in 5 steps: 1) Identification of fundamental cyber threats at the national
level 2) Identification of national level cyber security measures and capacities 3)
Selection of important and measurable aspects 4) Development of cybersecurity
indicators 5) Grouping of cybersecurity indicators.
This paper is an attempt to illuminate the socio-economicbackground and to
allocate conditions for a transition tothe digital economy. These issueswere also
raised by Slavin (2015) and Yudina (2016). Russia has a very high potential for
developing the digital economy. The country plans to utilize new technologies,
including blockchain, in areas directly related to the quality of life: management,
information infrastructure, research and development, human resources and
education, information security, smart city technology, and digital healthcare
(Veresha, 2016; Zhironkin et al., 2017, Betelin, 2018). Researchers expand this list
by adding the trend of offering new in the market (Maher et al., 2017;),enhanced
use of 3D printers, eco-friendly smart house building (Grömling, 2016; Panshin,
2016; Scantlbury et al., 2017), andother important aspects that give a boost to
digitalization.
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Conclusions
Findings demonstrate improvement in innovation development in Russia.
However, the country still lags behind developed European countries. The growth
rate in High-Technology Exports indicate the lag of Russia in the production of
products with high R&D intensity. In the field of legislation of the Russian
Federation, it is ranked first among the CIS countries, ahead of Kazakhstan and
Uzbekistan. In the overall ranking, Europe isthe leader in the implementation of
cybersecurity standards, as well as measures to combat cybercrime and
spam.Today, innovations, research and development form the core of political
ambitions in most developed and developing countries. Global spending on R&D
continues to grow,and the experts expect the portion of business in R&D spending
to increase.This study identifies the main directions of digital economy
development in Russia, its strengths and weaknesses. As evidenced, the country
occupies a high position in the National Cyber Security ranking. These findings
can be applied to createa strategic plan for innovation development in Russia. The
limitation is that the analysis uses data only from the reports of the Organization
for Economic Co-operation and Development; plans for the future study
involveanindependent analysis of innovation development in Russia, in particular
in the field of digital economy.
Acknowledgements
The work was supported by the Russian Foundation for Basic Research, project No. 18-
010-00133.
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DIGITALIZACJA W GOSPODARCE I INNOWACJACH: WPŁYW NA PROCESY
SPOŁECZNE I EKONOMICZNE
Streszczenie: Technologia cyfrowa znacząco zmieniła szybkość działania w gospodarce.
Internet i urządzenia cyfrowe są motorem wzrostu gospodarczego. Artykuł analizuje rosyjską
gospodarkę cyfrową i społeczeństwo w porównania z krajami UE i wskazuje wnioski dotyczące
przyszłych trendów rozwojowych. W oparciu o dane wtórne Komisji Europejskiej analizuje pięć
komponentów indeksu gospodarki cyfrowej i społeczeństwa. Obejmuje wskaźnik rozwoju
technologii ITT, wskaźnik globalnej innowacyjności (GII), wskaźnik gotowości sieciowej,
gospodarstwa domowe z dostępem do Internetu oraz eksport technologii. Analiza
międzynarodowa ujawnia znaczne różnice między Rosją a krajami UE w zakresie dostępu do
Internetu i gospodarki cyfrowej oraz ich wpływu na PKB i procesy społeczne, które mają
miejsce w kraju. Wyniki pokazują, że Rosja zajmuje pozycję w pierwszej dziesiątce krajów w
przypadku Indeksu rozwoju w ICT i wskaźnika gotowości sieci. Tempo wzrostu eksportu
zaawansowanych technologii wskazuje na opóźnienie Rosji w stosunku do innych krajów.
Według rankingu krajów eksportu zaawansowanych technologii Rosja pozostaje w tyle w
produkcji produktów o wysokiej intensywności B + R, takich jak produkty lotnicze, komputery,
farmaceutyki, przyrządy naukowe i maszyny elektryczne. Rosja ma silną pozycję w przypadku
cyfrowego bezpieczeństwa narodowego (63,64%), a także w udziale gospodarstw domowych z
Internetem.
Słowa kluczowe: digitalizacja, innowacje, Federacja Rosyjska, gospodarka cyfrowa
经济与创新中的数字化：对社会经济过程的影响
摘要：数字技术显着改变了经济运行的速度。互联网和数字设备是经济增长的推动力。本文在与
欧盟国家比较的背景下分析俄罗斯数字经济和社会，并对未来发展趋势作出结论。根据欧盟委
员会的二手数据，该研究包括数字经济和社会指数的五个组成部分。它包括ITT发展指数，全球
创新指数（GII），网络就绪指数，互联网共享家庭和高科技出口。跨国分析揭示了俄罗斯与欧盟
国家在互联网接入和数字经济方面的显着差异，以及它们对国内GDP和社会进程的影响。调查
结果显示，俄罗斯在国际发展指数和网络就绪指数中排名前十位。高科技出口的增长率表明俄
罗斯在排名中落后于其他国家。根据高科技出口国家的排名，俄罗斯在研发强度高的产品生产
方面滞后，如航空航天产品，计算机等。制药，科学仪器和电机。俄罗斯在国家网络安全（63.64
％）以及拥有互联网的家庭户数中占据强势地位。
关键词：数字化，创新，俄罗斯联邦，数字经济。
