This study aims to examine whether digital readiness contributes to national economic development and to clarify the role of innovation capability in this relationship. Drawing on endogenous growth theory, this paper investigates whether digital readiness directly promotes economic development or whether its effect is mainly transmitted through national innovation capability. By focusing on cross-country evidence, this study seeks to provide insights into how digital transformation can generate economic outcomes through innovation systems.
This study uses cross-sectional data from 66 countries, integrating the Cisco Digital Readiness Index, the WIPO Global Innovation Index and World Bank economic indicators. Partial least squares structural equation modeling is applied to examine the relationships among digital readiness, innovation capability and economic development. The analysis further tests the mediating role of innovation capability in transforming digital readiness into economic development outcomes.
The results show that digital readiness significantly improves national innovation capability, and innovation capability has a significant positive effect on economic development. However, the direct effect of digital readiness on economic development is less stable than its indirect effect through innovation capability. The mediation analysis indicates that digital readiness mainly contributes to economic development by strengthening national innovation capability. These findings suggest that digital readiness alone does not automatically generate economic growth; its economic value depends on the ability of national innovation systems to transform digital readiness into measurable development outcomes.
This study is limited by its cross-sectional design and the use of secondary country-level indicators, which restrict causal interpretation and may not fully capture institutional, regional or income-level heterogeneity. Future research could apply longitudinal data, include additional macroeconomic controls and examine differences between developed and developing economies. The findings imply that policymakers should not rely on digital readiness alone to promote economic development, but should strengthen innovation systems, human capital and institutional support to convert digital readiness into sustainable economic outcomes.
The findings suggest that governments should treat digital readiness as an enabling condition rather than a direct driver of economic growth. Investments in digital infrastructure, connectivity and technology access should be accompanied by policies that strengthen national innovation capability, including research and development, human capital, entrepreneurship and knowledge commercialization. Policymakers should also improve institutional support and coordination between public and private sectors to ensure that digital resources are effectively transformed into economic outcomes. This implies that digital transformation strategies should be integrated with broader innovation and development policies.
This study highlights that digital readiness can support broader social and economic progress only when countries possess sufficient innovation capability to convert digital resources into productive outcomes. Improved digital infrastructure and access may help reduce development gaps, but these benefits depend on complementary investments in education, skills, entrepreneurship and institutional support. Without such conditions, digital transformation may widen inequalities between countries or social groups with different capacities to innovate. Therefore, inclusive digital development should focus not only on technology access, but also on strengthening innovation ecosystems that enable wider participation in economic opportunities.
This study contributes both theoretically and practically. Theoretically, it extends endogenous growth theory by incorporating digital readiness into the analysis of economic development and identifying innovation capability as the key mechanism through which digital readiness influences economic outcomes. The findings show that digital readiness promotes economic development primarily through innovation capability rather than through a direct effect. Practically, the results suggest that policymakers should focus not only on digital infrastructure and investment but also on strengthening innovation capability, enabling digital readiness to be transformed into sustainable economic growth.
