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Innovate, Innovate, Innovate

ECLAC Study on the Digital Economy

For Spanish version>>

According to Microsoft's Bill Gates, "there isn't one single line of computer code that will have any value whatsoever within the next four or five years." Innovate, innovate, innovate is what a company must do today to hold on to its leadership. The process never stops and the secret is to stay constantly on the move, sometimes faster, sometimes slower, although lately the pace has been speeding up. 

The Digital Economy opens up a new, different world that is growing at a dizzying, if disorderly, pace. Its arrival may offer Latin America a historic opportunity to make a great leap forward in its development. But it also threatens to become another pitfall on what has proven to be a difficult road for the region's countries.

From Industrial Economics to Digital Economics: an Introduction to the Transition, in the Productive Development Series Nº100, includes some of the research on the digital economy currently underway at ECLAC. It provides a key to understanding the new economy that has been affected by the arrival of "Information Technology".

Martin R. Hilbert, the paper's author, argues that most of the literature on the New Economy lacks direction, structure and system, making understanding it difficult. His paper examines the differences between the Industrial-based Economy (bricks and mortar) and the Digital Economy (clicks), without burning up the old textbooks to replace them with new models, but rather using an innovative perspective that helps us to understand the transition.

The paper is provocative but at the same time brings together, classifies and makes intelligible an enormous mass of information on subjects that are redefining economies, as well as daily life, and which appear everyday in the media. It also provides definitions of the most commonly used terms and poses some questions.

The first chapter deals with new conditions of a knowledge-based society, work on Internet, and measuring the digital economy. The second chapter reviews the digital market, the reformulation of industries and groups in competition, the new transparency, entry barriers to business, forms of payment, the behaviour of prices and companies, product strategies and marketing, market equilibriums, company finance, legal and competitive tactics in the Digital Era. The last chapter takes a macro look at the issues raised: the role of organizations, of government and the private sector; market failures, the digital gap and the "catch up", and labour markets.

Hilbert suggests we abandon the idea that Internet is about technology. Indeed, he says, there are cables, computers, modems, websites and the rest. But all these elements function, or should function, to help people to interact and share information with each other. Because the worldwide web is about just that: people communicating with each other. Sooner or later the tools will become invisible.

The knowledge-based or "Information Society" is an economic and social system in which the generation, processing and distribution of knowledge and information are the sources of productivity, power and prosperity.

While in an Industrial Economy societies face issues of scarcity, in the Digital Era the flood of data produces new difficulties, given that our ability to process it remains limited. The economy evolves through the synergies that emerge from world inter-connectivity. There's an enormous need to understand the medium -the network of networks- to see what works and what doesn't work within it. The more we interact through the Internet, the more we learn. To some degree we are all apprentices in the Digital Era and in the new virtual field we all have a lot to relearn.

As part of this Series, ECLAC will soon publish a paper on how Latin American countries are adapting to these changes.

Internet access 1999


Source: Cámara de Comercio, Santiago,2000; Global Information Infrastructure Commission, 2000

May 13, 2001



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