Why Digital Investment Is Becoming Central to Business Growth in Advanced Economies

An OECD study finds that investment in digital technologies such as software, databases and ICT equipment is rapidly reshaping business investment across advanced economies. Countries that invest more in digital capital, especially the United States are seeing stronger productivity growth and economic performance.

A new study by the Organisation for Economic Co-operation and Development (OECD) shows that the digital transformation is changing the way businesses invest across advanced economies. Conducted by researchers from the OECD’s Economics Department, the study examines how investments in digital technologies such as computer hardware, software and databases are reshaping economic growth. The findings suggest that digital assets are becoming one of the most important drivers of business investment and productivity in modern economies.

For many advanced economies, productivity growth has slowed since the early 2000s. The situation worsened after the Global Financial Crisis, when business investment weakened across much of the world. Even years later, many OECD countries have struggled to return to the investment levels seen before the crisis. Economic uncertainty, weaker demand and structural changes in corporate behaviour have all contributed to slower capital accumulation.

However, not all countries have experienced the slowdown in the same way. The United States has continued to show stronger productivity growth and business investment compared with many European economies and Japan. The OECD researchers suggest that one of the main reasons for this difference lies in digital investment.

Digital Investment Is Growing Rapidly

Digital investment refers to spending on information and communication technologies. This includes computers, telecommunications equipment, software systems and databases. These tools allow businesses to store and process data, automate operations and offer new digital services.

Across OECD economies, digital assets now make up about one quarter of all business investment. In the United States, the share is even higher. Companies are spending increasing amounts on digital infrastructure to remain competitive in a data-driven economy.

Over the past two decades, investment in digital assets has grown much faster than spending on traditional assets such as machinery, buildings or transport equipment. Software and databases have seen especially strong growth as companies rely more on cloud computing, online platforms and data analytics.

Another notable feature of digital investment is its resilience. During economic downturns, companies often cut back on traditional investments. But spending on digital technologies tends to continue because firms depend on these systems to operate efficiently.

The United States Leads the Digital Race

While digital investment is rising across many countries, the speed of growth varies widely. The United States has been the clear leader in expanding digital investment over the past decade. Businesses there have increased spending on digital technologies at a much faster rate than firms in most other OECD countries.

Some smaller economies, particularly in the Baltic region and Central and Eastern Europe, have also recorded strong growth in digital investment as they modernise their economies. In contrast, many large European countries have seen more moderate increases. Japan has lagged even further behind.

These differences help explain why business investment has grown faster in the United States than in most other advanced economies. The OECD study suggests that stronger digital investment accounts for the majority of the gap in overall business investment growth between the United States and other OECD countries.

Not Just Big Tech Driving the Change

It is easy to assume that the rise in digital investment is mainly driven by major technology companies. Firms such as Apple, Microsoft, Amazon, Alphabet, Nvidia, Tesla and Meta are well known for spending heavily on digital infrastructure and research.

However, the study finds that these large technology firms account for only a portion of total digital investment. Even when research and development spending is included, these companies represent roughly a quarter of digital investment in the United States.

Most digital spending actually comes from businesses in many different sectors. Finance, retail, manufacturing, professional services and logistics companies are all increasing their use of digital technologies. As a result, digital transformation is spreading across the entire economy rather than remaining limited to the technology sector.

Why Digital Capital Matters for the Future

Digital assets behave differently from traditional forms of capital. Software and computer systems become outdated quickly because technology evolves so rapidly. This means companies must replace or upgrade their digital infrastructure regularly.

Despite this fast depreciation, digital capital continues to grow because businesses invest heavily in these technologies. As firms build more digital systems, their stock of digital capital expands faster than other types of capital.

One consequence of this trend is a widening digital gap between countries. The United States started with a relatively high level of digital capital and has continued to expand it quickly. Many other economies are increasing digital investment as well, but at a slower pace.

Looking ahead, digital technologies are expected to play an even greater role in economic growth. Advances in artificial intelligence, cloud computing and data analytics are likely to increase the importance of digital infrastructure. Countries that support digital investment through strong financial systems, open markets and skilled workforces may gain an important advantage in the global economy.

The OECD study highlights that the digital transformation of business investment is already underway. As companies continue to build digital capabilities, the ability to invest in digital capital may increasingly determine which economies lead in productivity and innovation in the years ahead.