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Citation: Popova, Y.; Cernisevs, O.;
Popovs, S. Contribution to Modern
Economic Region Theory: Factor of
Intangible Digital Resources.
Geographies 2025,5, 8.
https://doi.org/10.3390/
geographies5010008
Copyright: © 2025 by the authors.
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Article
Contribution to Modern Economic Region Theory: Factor of
Intangible Digital Resources
Yelena Popova 1,*, Olegs Cernisevs 2,* and Sergejs Popovs 3
1Transport and Telecommunication Institute, Faculty of Management and Logistics, LV1019 Riga, Latvia
2StarBridge Ltd., Research Department, LV1050 Riga, Latvia
3Institute of Life Sciences and Technologies, Daugavpils University, LV5401 Daugavpils, Latvia;
sergey.p@email.com
*Correspondence: popova.j@gmail.com (Y.P.); olegs.cernisevs@star-bridge.lv (O.C.)
Abstract: This article explores the transformative role of intangible resources and products
such as data, algorithms, and digital platforms in redefining economic region theory. The
goal of the study is to provide a framework for dealing with intangible resources and prod-
ucts and refining the cost calculation techniques for them. The article includes the genesis
of a theoretical approach to regional development and consideration of the implications of
theoretical provisions in practice. Intangible inputs have significant peculiarities compared
to tangible resources, and these peculiarities require a specific approach to the manage-
ment of regions, especially considering their impact on agglomeration, cost structures,
and market dynamics. The research is based on a comprehensive literature review and
comparison, and application of theoretical provisions to practice. The development of the
cost calculation framework is based on classical cost analysis considering the peculiarities
of intangible resources. The findings demonstrate that integrating intangible resources into
economic region theory broadens its applicability, offering a roadmap for regions to achieve
growth and resilience in the digital economy while addressing evolving global challenges.
Keywords: region development; intangible (digital) resources; intangible (digital) products;
cost analysis; practical implication
1. Introduction
Economic region theory examines how economic activities are distributed across ge-
ographic spaces and how these spatial arrangements influence development. It seeks to
understand the complex interplay between natural resources, human innovation, infrastruc-
ture, and networks within regions. Rooted in both geography and economics, the theory
incorporates diverse factors, such as agglomeration, innovation ecosystems, sustainability,
and the role of global networks, to explain how regions evolve and compete in a globalized
world. Ideas from fields like spatial planning, urban studies, and cultural geography
emphasize the multifaceted nature of regional dynamics, including the influence of social
processes, cultural identity, and digital transformation on regional economies.
The transition from resource-based economies to digital-first frameworks has radi-
cally transformed the nature of economic regions [
1
–
9
]. Contemporary economic regional
economies are significantly based on intangible assets, such as data and intellectual prop-
erty [
10
,
11
], as well as digital connectivity and innovation [
12
–
14
] as critical drivers of
economic growth. It is important for both established regions and emerging economies,
since these factors now challenge traditional notions of geographic clustering, creating
opportunities and risks.
Geographies 2025,5, 8 https://doi.org/10.3390/geographies5010008
Geographies 2025,5, 8 2 of 19
The concept of economic regions has evolved significantly. Historically, the competi-
tive advantage of a region was tied to its access to natural resources, infrastructure, and
industrial capacity [
15
] However, advancements in digital technologies have redefined
these parameters [
3
]. Digital products and data have emerged as new “raw materials”, or
resources, creating new possibilities for intangible economic drivers together with the tan-
gible ones [
2
]. The rise of blockchain technologies, fintech innovations, and decentralized
finance platforms further illustrates the disruptive potential of digitalization in economic
regionalization [16–23].
However, being of the same importance for regional development as traditional
physical resources, these intangible issues require peculiar attention, since the traditional
tools can be applied to them after significant changes. This refers to the definition of
resources, the determination of the impact and implications of these intangible resources,
their applications in traditional and digital areas, cost calculations, etc. [24–29].
It seems to be necessary to examine contemporary scientific publications on consider-
ing intangible non-material resources and products in the theory of region development,
and study of implications of active use of these resources on regional progress.
The goal of the study is to provide a framework for dealing with intangible resources
and products, and refining cost calculation techniques for them. The research determines
the role of intangible digital resources and products in contemporary regional development,
demonstrating the peculiarities of the functioning of these resources, and specifying the
necessary changes in cost calculations, which should be taken into consideration in the
process of employing intangible digital resources into the business environment of a region.
The article includes the genesis of a theoretical approach to regional development and
consideration of the implications of theoretical provisions in practice.
Research Limitations
The first limitation of the research is the set of regions that were used for exemplifying
the specific usage of intangible digital resources for regional development. Three regions
(Silicon Valley, Estonia, and Dubai) were chosen as representatives of different countries and
continents (North America, Europe, and Asia). The regions were chosen as geographically
and functionally distinct areas exhibiting economic interdependence, specialization, and
internal coherence in terms of production, trade, and resource allocation. Another reason
for this choice is the fact that their unique approach to managing the resources that are
especially considered in this study demonstrates very good practice, demonstrating that
intangible resources can significantly advance regional development. However, other
continents and countries can represent other examples of the efficient employment of
digital resources, which can be considered in other studies.
The second limitation is the consideration of intangible resource employment without
demonstrating the long-term perspective. However, we believe that the regions with
well-developed digital infrastructure will continue to transition to the digital basis of their
industries and businesses, while regions with some disparities in digital progress will
endeavor to use the example and experience of other countries and step-by-step employ
more and more digital resources for their progress. Nevertheless, the prediction of these
issues requires additional serious research, which can become the subject of new research.
Moreover, the cost function in the long run can include new components that are very
difficult to foresee at the moment.
The study does not consider the disparities in digital development of different regions.
Such an approach can greatly contribute to the research; however, this study demonstrates
how the usage of intangible digital resources can change the progress of regions. Moreover,
a decade ago, one of the regions (Estonia) that exemplifies this research, was a region with
Geographies 2025,5, 8 3 of 19
serious problems, and its implementation of a program for digitalization improved its
situation significantly. However, the study of differences in the employment of intangible
resources in digitally developed regions and regions with low levels of digitalization can
be interesting.
2. Theoretical Framework of Region Theory
Economic region theory has undergone substantial development, with contributions
from foundational thinkers to modern scholars who have integrated concepts from sociol-
ogy, urban studies, and digital economies.
The foundation of economic region theory in the 19th century emerged from classical
economics, where scholars began to explore the interplay between geographic space and
economic activity. Early contributions established principles of specialization, trade, and
the spatial distribution of resources and production. Smith, A. [30] highlighted the role of
regional specialization in emphasizing productivity maximization. David Ricardo’s theory
of comparative advantage [
31
] demonstrated the benefit of relative efficiencies of trade
specialization. Von Thünen, J. [
32
] provided the first formal spatial model of economic
activity based on transportation costs and proximity to markets. These theories served as a
cornerstone for later theories of industrial location. List, F. [
33
] discussed state intervention
in the integration of regions into national economies, as well as infrastructure and industri-
alization as tools for regional disparities reduction. Say, J.B. [
34
] introduced the approach of
the importance of resource allocation and innovation as drivers of regional differentiation
and economic growth. Meanwhile, Malthus, T. [
35
] explored how demographic shifts
influence regional economies.
The Industrial Revolution transformed economies and brought the idea of geographic
clustering of labor, capital, and infrastructure in emerging industrial cities with an emphasis
on specialization, trade, spatial organization, and the role of innovation and policy in
shaping regional development [36,37].
Marshall, A. [
38
,
39
] introduced the concept of agglomeration economies and the
economic advantages of geographical proximity, explaining how industrial clusters
benefit from knowledge spillovers, shared labor markets, and specialized suppliers.
Weber, A. [
40
] formalized a model of industrial location with an emphasis on cost minimiza-
tion, cost advantages, and dispersion (rising competition and congestion). Christaller’s
central place theory [
41
] was devoted to economic hubs based on accessibility and demand.
Schumpeter, J. [
15
] placed innovation at the core of regional growth, since it drives “creative
destruction”, reshaping industries and regions to achieve sustained economic dynamism.
Perroux, F. [
42
] explored the role of dominant industries and firms as “growth poles”
as economic hubs, driving development through linkages, spillover effects, and spatial
concentration of economic activity. These studies contributed to the formation of modern
regional science, emphasizing the critical roles of industrial clustering, spatial organization,
and innovation in driving regional economic development and explaining the uneven
progress of the regions.
Isard, W. [
43
] used input–output analysis to model the relationships between in-
dustries and regions, including the role of transportation, infrastructure, and economic
flows in shaping regional development. Myrdal’s cumulative causation theory [
44
] re-
vealed how growth reinforces regional disparities via uneven allocation of resources.
Hirschman, A. [
45
] analyzed the dual effects of regional growth, trickle-down effects,
and polarization effects. Christaller’s central place theory [
41
] recognized cities as nodes
driving regional and national economies due to advances in transport networks and em-
phasized connectivity as a key driver of economic integration and competitiveness.
Geographies 2025,5, 8 4 of 19
These works established the theoretical foundation for understanding the intercon-
nected, uneven nature of regional development and the role of targeted policies in fostering
balanced growth. Governments started applying these theories to regional policy, investing
in infrastructure and industrial hubs to address regional imbalances. Globalization, tech-
nological advances, and urbanization also reshaped regional dynamics [
46
–
49
]. Scholars
moved beyond the physical geography of industrial clusters to focus on global networks,
human creativity, and interconnected regional systems.
Krugman’s new economic geography [
13
,
50
] formalized the principles of agglomera-
tion, demonstrating how economies of scale, transportation costs, and market size drive the
clustering of industries, explaining the dominance of some regions. According to Castells,
M. [
51
–
53
], economic success depends on a region’s integration into global networks of
information, capital, and labor; the focus shifts from geographic proximity to the impor-
tance of connectivity and innovation within “spaces of flows” in a globalized economy.
Florida, R. [
54
–
56
] emphasized the role of the creative and knowledge workers as a driver
of regional competitiveness; cultural vibrancy and diversity attract innovative individuals
and sustain economic growth. The rise of global cities, as analyzed by such scholars as the
authors of [
51
,
56
–
64
] underscored the centrality of urban hubs in global economic networks.
Regions become dynamic, interconnected nodes, where success is determined by global
positioning, human capital, and adaptability to changing economic forces [65–71].
As the provided literature analyses show, contemporary researchers pay great at-
tention to the role of innovative technologies in the development of regions under the
conditions of digitalization [
4
,
23
,
72
–
74
]. Nevertheless, they do not specify the intangible
resources and products as a very important factor of economic success in the modern mar-
ket. This conclusion is supported by the study [3]. However, non-material resources have
a significant impact on regionality and regional development and they should be treated
separately since they have peculiarities in development, maintenance, and management.
The cost analysis for these resources also requires a specific approach. Therefore, this area
of contemporary region theory requires great attention from scholars.
Practical Employment of Innovations in Region Development
The 21st century has brought profound changes to economic region theory, driven
by the rising importance of digital technologies, intangible resources, and the growing
emphasis on sustainability and resilience [
75
–
77
]. As economies face the challenges of
globalization, climate change, and technological disruption, regions are increasingly build-
ing their competitiveness on intangible products such as data, intellectual capital, and
digital infrastructure [
78
–
81
]. The integration of these intangible resources and products
into economic systems has redefined the principles of regional development, illustrating
their transformative role within the framework of economic region theory. Two regions,
Estonia and Dubai, have been selected as illustrative examples of how intangible resources
and products are being used to drive regional development in the 21st century [
82
]. Both
regions demonstrate how the principles of economic region theory apply to the digital age,
where intangible resources play a transformative role similar to traditional resources in
industrialized economies.
One of the best examples of changing the production processes and frameworks is
Silicon Valley, which emerged in the middle of the 20th century and gained a leading
position due to its superior intangible products and materials, such as knowledge, data,
intellectual capital, and digital products, which function similarly to tangible inputs within
the framework of economic region theory [
83
–
85
]. Despite their non-physical nature,
intangible resources drive agglomeration and regional development, mirroring traditional
industrial clusters based on tangible goods. The intangible products face similar challenges
Geographies 2025,5, 8 5 of 19
and issues to traditional physical tangible products, for example, accessibility and scarcity,
agglomeration and spillover effects, infrastructure and market connectivity, and export and
economic influence.
Similar to coal or iron ore in traditional economies, intangible resources are scarce
and location-sensitive. Silicon Valley’s access to top research institutions and skilled labor
has served as the “resources” fueling its innovation ecosystem [
85
,
86
] The clustering of
firms and talent in Silicon Valley produces economies of scale and knowledge spillovers,
similar to the benefits seen in industrial regions. Just as proximity to tangible resources
reduces production costs, the concentration of expertise and networks amplifies innovation
in intangible-driven regions [
87
,
88
] Intangible production requires infrastructure analogous
to physical trade routes. Silicon Valley’s advanced digital networks and venture capital
systems parallel the role of railroads or ports in traditional industrial hubs, facilitating the
exchange and scaling of intangible goods like software and digital platforms [
86
,
89
,
90
].
Intangible products such as software and algorithms have become global exports, driving
economic growth much like steel or machinery in industrial regions. These intangible goods
are essential inputs for other industries, reflecting the foundational role of tangible resources
in production cycles. The principles driving traditional resource-based agglomeration, such
as clustering, market access, and interconnectivity, apply equally to the intangible economy,
revealing a modern extension of classical regional dynamics.
Estonia can serve as an example of a digital-first economy, and its ground-breaking
adoption of blockchain technologies and e-governance systems has positioned it as a global
leader in digital innovation [
91
]. Despite its small size and limited natural resources, Estonia
has built its economy on intangible products, leveraging its expertise in digital infrastruc-
ture to create a competitive advantage. Key initiatives such as e-Residency and digital ID
programs exemplify Estonia’s ability to integrate decentralized technologies into public and
private sectors [
73
,
92
]. The e-Residency program allows individuals from around the world
to establish businesses in Estonia without residing there physically, extending the country’s
economic reach beyond its geographic borders. Estonia’s blockchain-secured digital ID
system enables seamless interactions between citizens, businesses, and the government,
fostering trust and efficiency [92,93].
From an economic region theory perspective, Estonia’s intangible resources, such as
digital infrastructure, blockchain protocols, and human expertise, function like traditional
resources [
76
,
94
]. They are scarce, require investment, and form the foundation for in-
tangible products such as digital governance platforms and international fintech services.
Estonia’s digital transformation has also generated agglomeration effects, attracting tech
startups and investors, and reinforcing its position as a global innovation hub.
Another example of using intangible products and resources to create leadership in
certain areas of the economy is Dubai [
95
,
96
]. Its strategic focus on blockchain and smart
city technologies illustrates how regions with limited traditional resources can harness
intangible resources to achieve economic prominence. Lacking significant natural resources
beyond oil, Dubai has diversified its economy by becoming a global hub for fintech,
decentralized finance (DeFi), and digital innovation [
97
,
98
]. The Dubai Blockchain Strategy,
launched in 2016, aims to make Dubai the world’s first blockchain-powered government by
integrating blockchain technology into public services such as healthcare, real estate, and
logistics [
97
]. This strategy has not only improved efficiency but has also established Dubai
as a leader in blockchain adoption. Additionally, Dubai’s embrace of decentralized finance
platforms has attracted global fintech companies, creating a robust digital ecosystem.
Dubai’s transition mirrors the dynamics of traditional economic regions built around
physical resources. The city has developed the necessary infrastructure, including digital
connectivity, regulatory frameworks, and human capital, to process intangible resources like
Geographies 2025,5, 8 6 of 19
data and knowledge into high-value digital products. These products, such as blockchain
solutions and smart city technologies, function as exports that reinforce Dubai’s global
economic influence.
The 21st century has redefined economic region theory by elevating the role of in-
tangible resources in regional development. Estonia and Dubai exemplify how small or
resource-limited regions can leverage digital infrastructure, blockchain technologies, and
intangible products to create economic hubs. These facts confirm that intangible resources
and products behave like tangible ones within economic region theory, driving cluster-
ing, innovation, and global competitiveness in a way that echoes traditional industrial
economies. This transformation highlights the continued relevance of economic region
theory in a digital world.
3. Materials and Methods
This study adopts a qualitative, multi-method approach to analyze the role of in-
tangible resources and products in economic region theory. The methodology integrates
theoretical analysis, the study of intangible resources integration into economic systems,
and the development of cost measurement frameworks. By combining theory with empir-
ical analysis, the methodology ensures a comprehensive understanding of how intangible
resources and products reshape economic region theory.
3.1. Theoretical Analysis
A comprehensive review of the existing literature on economic region theory, intan-
gible resources, and digital economies was conducted. Foundational works by classical
economists and contemporary scholars were examined to establish the theoretical basis for
understanding how intangible inputs behave similarly to tangible resources within regional
economies. The studies of economists of the 19th and 20th centuries were chosen accord-
ing to the author’s contribution to region development theory. Articles by contemporary
scholars were chosen by application of the following methodology [99]:
First, they were determined the inclusion criteria. Those are as follows: the article should
be published in the journals indexed in Scopus or WoS; the full online text must be available;
the article must be in English; the articles must be relevant to the study’s goal and tasks. The
exclusion criteria are all the publications not satisfying the chosen inclusion criteria.
Then, keywords regarding region theory and special interest in digital intangible
resources and products were selected; these keywords were turned into search terms
using Boolean operators: “region” OR “regional” AND “growth” OR “development”
OR “progress” OR “advantage” AND “digital” OR “intangible” OR “non-material” OR
“non-physical” AND “resources” OR “products” (see Figure 1).
The search was applied to the titles of the articles and abstracts. The abstracts chosen
by these parameters were read and the articles potentially suitable for the study were
chosen. Then, the articles were skimmed, and the articles for detailed reading were selected.
They were analyzed for their contribution to contemporary region theory. The Zotero
software package was used to organize the chosen articles.
The analysis of the chosen articles demonstrated the great attention of the scholars to
the role of innovations in regional progress, and simultaneously ignorance of the consid-
eration of non-material resources and products as factors of these innovations. Therefore,
it is necessary to develop a framework for the study of intangible resources as a factor of
regional growth.
The study considers the application of innovative economic development in the spe-
cific regions of Silicon Valley, Estonia, and Dubai to illustrate the applied integration of
intangible resources into economic systems. These data were selected for their pioneering
Geographies 2025,5, 8 7 of 19
roles in leveraging digital infrastructure, blockchain technologies, and innovation ecosys-
tems to achieve regional competitiveness. Data from official reports, academic publications,
and policy documents were analyzed to identify key drivers and outcomes.
Geographies 2025, 5, x FOR PEER REVIEW 7 of 19
Figure 1. Search operators (generated by the authors).
The search was applied to the titles of the articles and abstracts. The abstracts chosen
by these parameters were read and the articles potentially suitable for the study were cho-
sen. Then, the articles were skimmed, and the articles for detailed reading were selected.
They were analyzed for their contribution to contemporary region theory. The Zotero soft-
ware package was used to organize the chosen articles.
The analysis of the chosen articles demonstrated the great aention of the scholars to
the role of innovations in regional progress, and simultaneously ignorance of the consid-
eration of non-material resources and products as factors of these innovations. Therefore,
it is necessary to develop a framework for the study of intangible resources as a factor of
regional growth.
The study considers the application of innovative economic development in the spe-
cific regions of Silicon Valley, Estonia, and Dubai to illustrate the applied integration of
intangible resources into economic systems. These data were selected for their pioneering
roles in leveraging digital infrastructure, blockchain technologies, and innovation ecosys-
tems to achieve regional competitiveness. Data from official reports, academic publica-
tions, and policy documents were analyzed to identify key drivers and outcomes.
3.2. Practical Implication of Theoretical Provisions
Based on the absence of proper consideration of intangible resources in contempo-
rary scientific publications, the authors analyzed the specified regions for the employment
of intangible resources in the course of regional development. The specific implementa-
tion of theoretical provisions in practice in traditional and digital industries as well as
their implications were examined. Comparative analysis was conducted to identify the
similarities and differences in how regions integrate intangible resources into their econ-
omies.
The necessity to change the traditional cost model for businesses operating in the
digital environment required the analysis of fixed and variable costs of enterprises. After
a comprehensive analysis of the cost structure of contemporary businesses, significant
contributions to the cost model were identified. The new cost model specifies separately
the peculiar costs of intangible resources, their maintenance, and progress.
Figure 1. Search operators (generated by the authors).
3.2. Practical Implication of Theoretical Provisions
Based on the absence of proper consideration of intangible resources in contemporary
scientific publications, the authors analyzed the specified regions for the employment of
intangible resources in the course of regional development. The specific implementation of
theoretical provisions in practice in traditional and digital industries as well as their impli-
cations were examined. Comparative analysis was conducted to identify the similarities
and differences in how regions integrate intangible resources into their economies.
The necessity to change the traditional cost model for businesses operating in the
digital environment required the analysis of fixed and variable costs of enterprises. After
a comprehensive analysis of the cost structure of contemporary businesses, significant
contributions to the cost model were identified. The new cost model specifies separately
the peculiar costs of intangible resources, their maintenance, and progress.
4. Results and Discussion
The analysis of intangible resources and products within economic region theory
highlights their transformative role in modern economies. These intangible inputs—data,
intellectual capital, and digital products—operate beyond physical geographies, relying
on digital infrastructure and connectivity. The analysis of documents and business im-
plementation in innovative regions demonstrated the similarity of the impact of tangible
and intangible resources on region development and simultaneously, great differences
in their occurrence, maintenance, and development. Unlike tangible goods, the delivery
and measurement of non-material resources and products are tied not to physical volume
or weight but to occurrences of transactions, emphasizing the number and frequency of
exchanges as key indicators of economic activity.
4.1. Peculiarities of Intangible Resources and Products
Intangible resources and products are characterized by their non-physical nature, scala-
bility, and reliance on digital networks [
2
,
100
]. Their delivery extends beyond geographical
boundaries through decentralized systems that allow instant access and distribution. The
Geographies 2025,5, 8 8 of 19
absence of physical constraints necessitates new methods of measurement and analysis
to quantify their economic contributions. Therefore, such features as non-physical nature,
transaction-based measurement, global scalability and access, and network-driven value
can be considered for these types of resources and products.
Intangible products lack physical form, existing as software, intellectual property, al-
gorithms, or data. This makes their movement independent of traditional logistics systems,
with delivery occurring through virtual channels [
3
]. Estonia’s blockchain technologies
and Dubai’s decentralized finance platforms exemplify how intangible products bypass
physical geographies. The primary metric for assessing intangible resources and products
is the number of transactions, represented by access, use, or exchange [
101
–
103
]. A transac-
tion could be a software download, a data exchange, or the use of an online service. For
example, the success of Estonia’s e-Residency program can be measured by the volume of
registrations, while Dubai’s blockchain services can be evaluated by the number of con-
tracts processed via decentralized platforms. Intangible products are inherently scalable,
allowing simultaneous use by multiple recipients without depleting the resource. This
scalability amplifies their economic impact, as demonstrated by the global adoption of
Estonia’s digital governance tools or Dubai’s blockchain-based systems. Each transaction
represents an economic occurrence that contributes to regional GDP. The economic value
of intangible inputs increases with network connectivity [
76
]. In regions like Estonia and
Dubai, the interaction of users within these digital ecosystems enhances the utility of intan-
gible products. The volume of transactions within these networks reflects their economic
strength and regional influence.
The measurement of intangible resources and products requires a shift from traditional
metrics to transaction-based indicators. Transactions capture the frequency and scale of
access to intangible resources, providing a tangible method for evaluating their economic
impact. Key metrics include transaction volume, transaction value, transaction speed and
scalability, and user engagement.
The number of occurrences where an intangible product or resource is accessed, used,
or exchanged is a direct measure of its economic contribution. For example, Estonia’s
blockchain infrastructure can be assessed by tracking the number of secured transactions,
such as contracts or identity authentications. Each transaction has an associated economic
value, whether it is the licensing fee for software, the cost of a digital service, or the
monetization of user data. Dubai’s decentralized finance platforms, for instance, generate
economic output based on the cumulative value of contracts executed [
104
]. Intangible
products operate on a global scale, with transactions occurring immediately. This metric
reflects the efficiency and reach of the region’s digital infrastructure. Estonia’s digital ID
system and Dubai’s blockchain services exemplify how rapid and scalable transaction
capabilities drive competitiveness. The number of unique users interacting with intangible
products offers another layer of measurement. In Estonia, the adoption rate of e-governance
services, such as digital voting or tax filing, serves as an indicator of economic integration
and public trust in these intangible systems [73,91,94].
All these peculiarities have significant economic implications at the regional level.
Such regions as Estonia and Dubai exemplify how the measurement of intangible
resources and products aligns with transaction-based metrics. In both cases, economic
output is increasingly tied to the volume, value, and frequency of transactions within
digital ecosystems.
Estonia has created a digital-first economy by leveraging blockchain technologies to
deliver services through high-frequency, low-cost transactions. Each transaction, whether
an identity verification or a business registration, represents an economic event contributing
to GDP.
Geographies 2025,5, 8 9 of 19
Dubai has positioned itself as a global blockchain and fintech leader by facilitating
large-scale, high-value transactions in decentralized finance. These transactions illustrate
how intangible products serve as the foundation for economic growth in resource-scarce
regions.
4.2. Parallels to Tangible Inputs in Economic Region Theory
Intangible resources and products, despite their non-physical nature, replicate the
economic behavior of tangible resources. Table 1demonstrates the principal characteristics
that are similar for tangible and intangible products and resources.
Table 1. Tangible and intangible resources and their application (generated by the authors).
Feature Description
Delivery and Distribution
Just as physical resources are delivered to factories or markets, intangible inputs
are distributed through digital networks. Transactions replace the physical
movement of goods as the key economic activity [105,106]
Economic Contribution
The cumulative value of intangible transactions is equivalent to the economic
output of traditional production cycles. Each transaction reflects the utilization of
resources, whether human expertise, data, or digital infrastructure [2,107]
Clustering and Agglomeration
Regions like Estonia and Dubai demonstrate how digital economies replicate
clustering dynamics, where innovation ecosystems attract talent and investment,
amplifying transaction volumes and economic output [108–110]
The delivery and measurement of intangible resources and products redefine tradi-
tional concepts of economic contribution within the framework of economic region theory.
By focusing on transaction volume, value, and scalability, regions can quantify the impact
of intangible inputs on their economies. Estonia and Dubai illustrate how leveraging
intangible resources drives regional competitiveness, confirming their alignment with
the principles of economic region theory while expanding its applicability to the digital
age [111–113].
The shift to intangible resources and products also introduces significant implications
for the theory of regions, particularly in the realm of cost calculation for manufacturing.
Unlike tangible inputs, which require physical extraction, transportation, and storage,
intangible resources demand investments in digital infrastructure, human capital, and
technological development. Costs are tied less to logistics and more to the creation, mainte-
nance, and optimization of digital ecosystems.
This necessitates a re-evaluation of cost structures in manufacturing with intangible
inputs, focusing on factors such as the expense of acquiring data, the cost of maintaining
secure digital platforms, and the scalability of intangible product deployment. These
considerations blur the boundaries between traditional production costs and the ongo-
ing operational costs associated with intangible inputs, forcing regions to adapt their
economic models.
Regions that integrate these cost assessments into their economic strategies will be bet-
ter positioned to attract global investment, foster innovation, and maintain competitiveness.
This evolution underscores the dynamic nature of economic region theory, requiring it to
incorporate the transformative role of intangible inputs and their associated cost dynamics
in the manufacturing and production cycles of the 21st century.
4.3. Implications for Traditional Industries and Emerging Digital Economies
The authors state that the shift toward using intangible resources—such as data, algo-
rithms, and intellectual property—in the production of goods and services has significant
Geographies 2025,5, 8 10 of 19
implications for traditional industries and emerging digital economies. These effects are
massive, influencing cost structures, operational models, and regional development dy-
namics. Table 2contains the analysis of certain theoretical frameworks in the application of
the new realia to traditional and emerging economic areas.
Table 2. Application of theoretical provisions to practice in traditional and digital spheres (generated
by the authors).
Theory Implications for Costs Traditional Industries Emerging Digital Economies
Marshall’s Principle of
Agglomeration Economies
[38]. Marshall’s principle
highlights the benefits that
arise when businesses cluster
geographically, such as shared
infrastructure, labor pools,
and knowledge spillovers.
Intangible products reduce
the dependency on physical
proximity for resource sharing.
For example, cloud computing
and remote data-sharing
platforms lower fixed costs for
infrastructure. However,
variable costs might increase
as companies compete for
skilled labor to work with
these intangible inputs.
Manufacturing may continue
clustering around physical
resources but will increasingly
rely on shared intangible
products like AI models,
automation software, and
analytics to optimize
production.
Digital firms benefit from
virtual agglomeration, where
innovation clusters can
emerge without physical
boundaries, reducing
operational fixed costs while
still benefiting from
knowledge networks.
Paul Krugman’s New
Economic Geography
Framework [13]. Krugman
emphasizes the role of
economies of scale and
transport costs in shaping
regional economic patterns.
For digital economies,
transport costs for intangible
goods are negligible (e.g.,
delivering software or data
products globally). This shifts
the cost burden to scaling
intangible resources, such as
data collection and AI
development, where fixed
costs dominate.
These industries face
increased competition from
regions leveraging intangible
products to optimize supply
chains and customer insights,
reducing their cost advantage
based on geography.
Digital-first regions can
specialize in intangible asset
production, such as software
or creative content, with fewer
constraints on location. This
enables the rise of new
economic hubs outside
traditional industrial centers.
Manuel Castells’ Concept of
the “Network Society”.
Castells’ theory describes a
society organized around
networks rather than
traditional hierarchies [51,52].
In the network society,
intangible resources such as
data and digital platforms
enable companies to scale
globally without proportional
increases in variable costs.
Fixed costs are concentrated
in building and maintaining
network infrastructure.
These industries increasingly
integrate networked
technologies, such as IoT for
logistics or predictive
analytics, to remain
competitive, adding
intangible costs to their
operations.
They thrive in the network
society by leveraging
distributed systems, creating
ecosystems of interconnected
services that minimize
traditional cost structures
while maximizing network
effects.
Richard Florida’s Concept of
the “Creative Class”. Florida’s
concept emphasizes the
economic power of
individuals engaged in
creative and
knowledge-driven work
[54,55].
Companies investing in
intangible products face
higher variable costs
associated with attracting and
retaining the creative class,
whose expertise drives
innovation and value creation.
Fixed costs also shift toward
enabling creative
environments, such as
innovation labs and
collaborative platforms.
To stay competitive,
traditional firms must
increasingly employ members
of the creative class,
integrating intangible
innovation into their
processes, which raises both
fixed and variable costs
related to human capital.
These economies are
inherently tied to the creative
class, as their success depends
on leveraging creative talent
to develop, refine, and deploy
intangible products. Regions
fostering the creative class
attract disproportionate shares
of digital economic activity.
An implications assessment through the theoretical frameworks shows that the integra-
tion of intangible resources into production profoundly affects both traditional industries
and emerging digital economies. Traditional industries incorporate intangible products
into their production processes, often shifting costs toward skilled labor and digital in-
frastructure. Emerging digital economies, by contrast, benefit from lower transport costs,
flexible scaling, and global reach.
Geographies 2025,5, 8 11 of 19
Theoretical perspectives highlight the following:
•
Marshall’s agglomeration economies suggest that clustering remains beneficial but
increasingly virtual.
•
Krugman’s framework shows how intangible products reduce the importance of
transport costs, allowing new hubs to emerge.
•
Castells’ network society emphasizes the centrality of digital networks in reshaping
cost structures.
•
Richard Florida’s creative class underscores the critical role of talent in leveraging
intangible resources.
Overall, as the global economy evolves, the traditional focus on physical resources
must shift to include intangibles, fundamentally altering the calculation of fixed and
variable costs across industries.
4.4. Costs Calculation
In modern production systems, total production costs are determined by the combina-
tion of fixed and variable costs associated with both tangible and intangible resources. This
approach highlights the interdependence of traditional and digital economies, where both
physical resources and intangible products contribute to economic output.
The total production cost (TC) can be expressed as the sum of fixed costs (FC) and
variable costs (VC) for both tangible (T) and intangible (I) resources:
TC =FCT+FC I+VCT+VCI(1)
where:
FCTis fixed costs for tangible resources.
FCIis fixed costs for intangible resources.
VCTis variable costs for tangible resources.
VCIis variable costs for intangible resources.
Fixed costs for intangible resources (FC
I
) represent expenses that remain constant
regardless of the level of production or transactions. These costs are primarily associated
with creating, maintaining, and developing the foundational infrastructure, systems, and
intellectual resources required to utilize intangible resources.
The formula for FCIcan be expressed as:
FCI=R+ID+E+S(2)
where:
Ris research and development costs, representing the expenditures on innovation,
such as developing algorithms, software, patents, and new technologies [114–116].
I
D
is digital infrastructure costs, representing the investments in establishing and
maintaining data centers, cloud platforms, blockchain systems, and other digital frame-
works [117,118].
Eis education and training costs, representing the costs of building human capital,
including training programs, upskilling employees, and educational initiatives to develop
the skilled workforce required to manage intangible resources [119,120].
Sis security and compliance costs, representing the expenses related to cybersecurity
systems, data protection frameworks, and regulatory compliance to ensure the secure and
lawful operation of digital infrastructure [121,122].
In their turn, each type of cost can be determined in the following way:
R=∑n
i=1(CR)(3)
Geographies 2025,5, 8 12 of 19
CRrepresents the cost of individual R&D projects.
ID=CDC +CCL +CBT (4)
Cdc is the cost of data centers.
CCL is the cost of cloud services infrastructure.
CBT is the cost of blockchain systems.
E=N×CT(5)
N—Number of employees trained.
CT—Cost per training program.
S=CCY +CRC (6)
CCY is the cost of cybersecurity measures.
CRC is the cost of regulatory compliance.
Variable costs for intangible resources (VC
I
) are expenses that fluctuate with the level
of usage, transactions, or production output. These costs are directly tied to the operational
utilization of intangible inputs, such as data, algorithms, digital platforms, or cloud services,
and scale proportionally with demand or activity.
The formula for VCIcan be expressed as:
VCI=T×CT+D×CD+U×CU(7)
where:
Tis the number of transactions, i.e., the total occurrences of the use or exchange of
intangible products or resources.
C
T
is the cost per transaction, i.e., the expense incurred for each individual transaction,
such as blockchain validation fees or API usage costs.
Dis data volume, i.e., the total quantity of data processed, transferred, or stored
(measured in terabytes, gigabytes, etc.).
C
D
is the cost per data unit, i.e., the cost of handling a unit of data, including processing,
storage, or bandwidth charges.
Uis user engagement, i.e., the total number of active users or system participants
interacting with intangible products or services.
C
U
is the cost per user, i.e., the average expense associated with each user, including
platform maintenance and customer support.
The developed formulae, which fundamentally reflect traditional fixed and variable
costs, introduce novel concepts when applied in practice. These innovations enable the
formulation of cost policies tailored to emerging digital industries, taking into account the
determined types of expenses associated with these regional companies. Consequently,
this approach is focused on transforming the cost–benefit analysis framework for digital
enterprises, leading to a comprehensive redefinition of cost calculation methodologies
within the digital economy.
4.5. Challenges for Practical Employment of Intangible Digital Resources
The thoughtful employment of intangible digital resources can significantly decrease
the development gap between regions. However, disparities such as issues in infrastructure
development and availability, uneven internet connectivity, digital literacy, availability of
staff, differences in legislation, and others must be carefully addressed [123,124].
Geographies 2025,5, 8 13 of 19
The main structure of challenges faced by businesses employing intangible digital
resources is determined by Formula (2) in this study.
4.5.1. Research and Development
Regions have different possibilities for research development since it requires not only
staff with appropriate knowledge and competencies but also active government and legal
support, the availability of necessary tools, and significant financial investment [125,126].
One possible solution is substantial governmental support, including funding of
knowledge- and technology-intensive industries, creating the proper conditions for staff
training (funding of education, making available content in the national language and
appropriate for specific regions, etc.).
4.5.2. Digital Infrastructure
According to the OECD report for G20, companies can be classified as fully digital or
partially digital, making all of them potential users of regional digital infrastructures [
127
].
Regions differ in infrastructure development. The regions with well-developed infrastruc-
tures have obvious advantages over other regions. Developing new infrastructure and
improving existing infrastructure is a great challenge.
Another issue is the availability of this infrastructure. For some regions, the advantages
of infrastructure cannot be exploited; for example, for regions under sanctions. This factor
certainly hinders the development of such regions, making them refuse to use the existing
infrastructure or develop new infrastructure instead of investing in the further development
of the region [128,129].
The usage of infrastructure can be a substantial financial burden for industries and
businesses. In this case, they prefer to continue using more of the traditional resources and
trying to exclude the intangible ones.
The solution for these issues is a collaboration with infrastructure providers if available,
active participation of government in infrastructure development, and cooperation with
other businesses using digital intangible resources.
4.5.3. Education and Training
This issue is very serious and requires long-term strategies since it includes the possi-
bility of affecting not only current markets but also forming a trend for future generations.
The challenges include the specialization of education, which requires changes within
universities, and the funding of such serious changes. However, if to speak here about
different regions, the greatest challenges are created by national languages and the pecu-
liarities of education in different regions. Most of the content for education and training is
created in English and is peculiar to the regions that are well-developed economically and
digitally [130,131]. This fact limits specific regions according to the national language.
The possible solution is improvement in digital literacy via special training organized
for the local population, improved language skills, and changed education trends. These
activities require serious funding, which becomes a new challenge.
4.5.4. Security and Compliance
Security has become a “sacred cow”, and there are numerous regulatory acts devoted
to cybersecurity, data protection, personal data protection, and so on. On the one hand, it
creates trust. However, on the other hand, it can hinder the intensive development of some
industries or regions. Legislation differs from region to region, which hinders the creation
and usage of, for example, infrastructure, common to different regions [
132
,
133
]. It is not
always possible to comply with all the legal acts existing in a certain region. As a result,
Geographies 2025,5, 8 14 of 19
digital businesses are concentrated in regions with more friendly legislation, contributing
more to the development of these regions.
5. Conclusions
This article contributes to the advancement of modern economic region theory by
highlighting the transformative role of intangible resources and products, such as data, al-
gorithms, and digital platforms. It demonstrates how intangible resources drive innovation,
productivity, and competitiveness, reshaping regional dynamics in the digital age.
However, the literature review demonstrated the lack of scholars’ attention to non-
material resources and products as factors in the development of modern regions. Never-
theless, these resources have great peculiarities and require specific maintenance, progress,
and management. The article demonstrates the peculiarities of these resources.
The comparative analysis showed that the theoretical provisions of regional theory can
be successfully applied not only to traditional manufacturing but also to digital production
using intangible resources.
The production of intellectual, non-material-by-nature products cannot occur in iso-
lation and requires a dedicated, well-developed infrastructure. This can include human
capital, a robust energy sector, flexible government regulations, and other related areas.
Thus, the modern theory of economic regions can be effectively used as a basis for selecting
locations for product manufacturing and distribution.
Despite this, neglecting resources and product type in cost estimation can lead to
resource misallocation. In this study, we propose an updated cost calculation framework
that offers a more optimal way to estimate costs and to provide cost policies in enterprises
driven by innovations and operating in the digital environment.
The analysis confirms that intangible resources, beyond physical geography, influence
agglomeration and cost structure in the same way as tangible resources. The introduction
of transaction-based metrics and cost calculation frameworks for intangible products,
capturing fixed costs for digital infrastructure and variable costs tied to transactions, offers
a new dimension to regional economic analysis.
This contribution expands economic region theory by emphasizing the integration
of intangible resources into production cycles as a cornerstone of modern regional devel-
opment. Policymakers are urged to adopt strategies that incorporate both tangible and
intangible resources and products, ensuring sustainable growth and global competitiveness
in an era defined by digital innovation.
Author Contributions: Conceptualization, O.C. and Y.P.; methodology, Y.P. and S.P.; validation, O.C.,
Y.P. and S.P.; formal analysis, O.C.; investigation, O.C.; data curation, O.C.; writing—original draft
preparation, O.C. and Y.P.; writing—review and editing, Y.P. and S.P.; visualization, S.P.; supervision,
Y.P.; project administration, Y.P. and S.P. All authors have read and agreed to the published version of
the manuscript.
Funding: This research received no external funding.
Data Availability Statement: The original contributions presented in this study are included in the
article. Further inquiries can be directed to the corresponding author(s).
Conflicts of Interest: Olegs Cernicevs is a Member of Board of Directors of Starbridge Ltd., the other
authors declare no conflicts of interest.
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