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Risk and Investment in the Global Telecommunications IndustryFiled Under: General

Introduction

The new economy can be characterized in a number of different ways but one way to look at the new economy is to identify industries that are undergoing the greatest amount of structural change and have the greatest opportunity for growth. Three industries stand out as having particularly promising futures: biotechnology, energy and information technology (IT). Collectively these three industries may be called the BET economy. Of these three industries, the IT industry (broadly comprised of the technology, media and
telecommunications (TMT) sub- industries) is the one industry that can contribute the most to productivity improvements in countries. Technological progress can lead to process innovation (lower cost ways of producing existing products) or product innovation. Furthermore, from neoclassical growth theory, technological improvements are the only way to increase the living standards in countries that have reached the golden rule. An increase in technology raises the production function and increases the steady state amounts of capital stock and output. In terms of economic performance, maximizing productivity growth is the single most important objective for a country to have since increases in productivity growth lead to higher living standards.

Productivity growth can be influenced by a number of different factors or drivers. Broadly speaking, these factors include macroeconomic policy, regulatory environment, innovation, industrial structure, human capital, management strategies and policies, trade, and investment. For large industrialized countries like those in the G7 or G10, economic performance depends in large part on coordinating the actions between these various drivers to enhance productivity. The shortage of the necessary resources to accomplish this objective is not that large of a problem. For developing countries, the situation is often much more difficult because, in addition to successfully coordinating the actions of the various drivers, developing countries also face a shortage of financial capital. As a result, foreign investment is becoming an increasingly important driver behind productivity growth in developing countries.

Taken From : Digital Economy – Impacts, Influences and Challenges