Why Developing Asia’s Digital Boom Isn’t Delivering Broad Entrepreneurial Innovation

Developing Asia has invested heavily in digital infrastructure, yet a major comparative study finds it lags behind other developing regions in turning digitalization into broad entrepreneurial innovation. The gap stems from limited digital skills, uneven access to e-government services, and innovation gains concentrated mainly in advanced urban hubs.

Digital transformation is surging across the developing world, yet a new comparative study by researchers from Xiamen University Malaysia, Tecnológico de Monterrey, Imperial College London, Loughborough University London, and the Asian Development Bank uncovers a paradox at the heart of developing Asia. Despite major investments in digital infrastructure, strong governance indicators, and a decade of rising connectivity, the region is capturing far weaker entrepreneurial innovation gains than Africa, Latin America, or emerging Europe. Drawing on data from almost 70 developing countries between 2013 and 2022, the study combines individual-level survey insights from the Global Entrepreneurship Monitor with national digitalization metrics from the Global Innovation Index to examine how information and communication technologies influence entrepreneurs’ ability to introduce new products and services. The global trends are clear: digitalization boosts innovation almost everywhere, but Asia remains an unexpected outlier.

When Digital Foundations Fail to Spark Innovation

Across developing economies worldwide, better ICT access, greater digital adoption, and stronger online government services are consistently linked with greater entrepreneurial creativity. Entrepreneurs embedded in digitally capable environments are more likely to bring forward new ideas, disrupt markets, and respond to emerging needs. Governance-related indicators, especially e-participation and accessible online public services, deliver the most powerful effects, lowering barriers and expanding opportunities. But in developing Asia, the same drivers produce muted, inconsistent, or even negative results. ICT access, usually a strong positive, turns negative in Asia, suggesting that infrastructure without skills may hinder rather than help. ICT use shows similarly weak effects. The most surprising result is that government online services, a top global enabler of innovation, have no measurable impact in Asia, while e-participation yields gains far smaller than in peer regions. The pattern points to a clear conclusion: digital systems exist, but entrepreneurs are not fully benefiting from them.

The Skills Gap That Undermines Connectivity

One of the strongest explanations for Asia’s “translation gap” lies in the mismatch between digital access and digital capability. Many Asian economies have rolled out high-speed broadband, mobile payments, and e-commerce platforms, yet entrepreneurs, especially those in rural areas and informal sectors, often lack the managerial and technical skills needed to make effective use of these tools. Connectivity without capacity leads to underuse or inefficient use, and the econometric results confirm this. The contrast with Africa is illuminating. There, entrepreneurs leveraged mobile-money ecosystems to bypass formal banking barriers and innovate despite weaker physical infrastructure. Asia’s infrastructure is more advanced, but without parallel investment in digital skills, mentoring, and business support systems, the innovation outcomes remain limited.

Institutions That Work on Paper but Not in Practice

A second barrier lies in the accessibility of digital governance. Developing Asia scores relatively high on indicators of government online services and digital participation. Yet entrepreneurs report limited engagement with these platforms, and the statistical analysis shows little to no innovation effect. This suggests that government portals may be difficult to navigate, insufficiently promoted, or not designed with small and medium-sized enterprises in mind. By contrast, Latin American cities offer lessons in inclusive digital governance. Platforms like Buenos Aires’ BA Elige demonstrate how user-friendly digital services can expand participation, streamline decision-making, and empower local innovators. Asia’s challenge is not the absence of digital government, but its limited reach and relevance to everyday entrepreneurs.

A Digital Divide That Keeps Innovation Concentrated

Asia’s weaker innovation outcomes also reflect deep structural divides. Large firms and advanced urban hubs, such as Singapore, Shenzhen, Bengaluru, and Kuala Lumpur, gain significantly from digital transformation, but smaller firms, rural enterprises, and informal workers remain on the periphery. This uneven diffusion suppresses aggregate innovation statistics even when certain sectors thrive. Eastern Europe offers a contrasting model: Estonia and other economies have scaled digital governance and services across smaller municipalities and SMEs, ensuring broad participation. For Asia, improving diffusion means investing in rural broadband, localizing e-government services, and tailoring programs to the needs of micro and informal enterprises.

In essence, developing Asia has built impressive digital foundations but has yet to convert them into broad-based entrepreneurial innovation. Closing this gap requires shifting focus from access to ability, strengthening skills, simplifying governance systems, and ensuring digital benefits reach entrepreneurs wherever they are. If these challenges are addressed, the region has the potential not only to catch up but also to lead in demonstrating how digital transformation can drive inclusive and sustainable innovation.