Measuring digital innovation

Digitalisation is reshaping how businesses operate and creating new challenges for measuring productivity. Building on previous ESCoE research, this project examined how digital technologies are changing production, investment and economic growth. 

The research focused on four interconnected areas: business reorganisation and longer production chains, the impact of artificial intelligence (AI), data as an intangible asset, and digital infrastructure. It explored how digitalisation affects productivity measurement, investigated AI adoption and its relationship with firm performance, developed methods to estimate the value of data, and examined the availability of information on digital infrastructure and the gaps that remain. 

Together, these strands improve our understanding of how digitalisation is transforming the economy and provide new approaches for measuring its contribution to productivity and growth. 

Given that the topic of interest is new and rapidly evolving, the data on digital innovation is scarce. We used a range of data sources and methods, including firm-level analysis and case studies.

For research on longer production chains, we developed a firm-level dataset on a multitude of production inputs, comprising traditional labour and capital inputs, as well as a range of intangible and services inputs. This allowed analysis of the connection between different inputs and output in a growth accounting framework.

We also used firm-level analysis to explore the impact of artificial intelligence (AI). Using data on AI use collected from company websites, combined with firm-level financial data through fuzzy matching, we explored the link between AI use and performance.

For research on data as an asset, and on digital infrastructure, we started from the position that relatively little is known. Therefore, our initial work involved compiling a range of statistics on the structure and size of the data economy, using various frameworks and case studies, and on collating available data on digital infrastructure. Our subsequent work valued different types of data, using methods such as discreet choice analysis. Other analysis valued data by comparing the organisational capital of data-intensive and less data-intensive firms. 

The findings from this project have demonstrated that digital innovation is important for growth and productivity.

Our work on the data economy made a preliminary, conservative estimate of the market size for data in the global hospitality industry of $43.2 billion, with a growth rate currently doubling market size every three years. This acts as a case study to demonstrate the importance of data, even in a sector most would consider not very digital.

In work on production chains, digital and productivity, we found that large firms are more digital-intensive than small ones and that digital adopters have higher productivity than non-adopters. However, the nature of the digital engagement matters. Having key digital capabilities available in-house, as opposed to purchasing in digital services from external suppliers, seems to be an important indicator.

Our work on cloud computing suggests that cloud usage can positively impact firm productivity, but the impact is not immediate as firms need to learn how to use this new technology. The impacts are larger for smaller firms, consistent with the idea that cloud opens up opportunities for these firms to engage in innovative activities. 

This research is helping improve how the digital economy is measured in the UK and internationally. 

It has informed methodological development at the UK Office for National Statistics (ONS), including work on digital innovation, Digital Supply and Use Tables, AI, and internet infrastructure. 

It has also contributed to discussions on the treatment of digital activity within the System of National Accounts and has been shared through international conferences and events, helping to maintain the UK’s leading role in this area.

Working papers, reports: 

Romanko, O. (2023) ‘Technology and firm performance: evidence from online data sources’ King’s College London Doctoral Thesis 

Coyle, D. and Msulwa, R. (2022) Digital Concrete: Productivity in Infrastructure Construction’ ESCoE Discussion Paper Series, ESCoE DP 2022-21, 29 September 2022 

Coyle, D., Lind, L., Nguyen, D. and Tong Koecklin, M. (2022) ‘Are digital-using UK firms more productive?’ ESCoE Discussion Paper Series, ESCoE DP 2022-06, 10 March 2022 

Coyle, D. and Manley, A. (2021) “Potential social value from data: an application of discrete choice analysis” ESCoE Discussion Paper Series, ESCoE DP 2021-17, 21 December 2021 

Coyle, D. and Li, W. (2021) “The data economy: Market size and global trade” ESCoE Discussion Paper Series, ESCoE DP 2021-09, 2 August 2021 

Presentations: 

Coyle, D.  “Taking data seriously: what should economic modellers and data scientists be measuring?” EconMod Conference, Luxembourg, July 2026 

Coyle, D. ‘The cost of computing and the productivity puzzle’ ESCoE Conference on Economic Measurement 2023, Plenary Session II, King’s College London, 17-19 May 2023 

Coyle, D., Lind, L., Nguyen, D. and Tong Koecklin, M. “Are digital-using UK firms more productive?” 7th WorldKLEMS Conference, Plenary Session 1 Digital and Intangibles, University of Manchester, 12-13 October 2022 

Coyle, D.? “Are Digital-using UK Firms more Productive?” ESCoE Conference on Economic Measurement 2022, Special Session D, University of Strathclyde, 25-27 May 2022 

Romanko, O. ‘Digital Opportunity: How Cloud Computing Changes the Shape of the UK Economy‘, ESCoE Conference on Economic Measurement 2022, Contributed Session F: Digitalisation, University of Strathclyde, 25-27 May 2022 

Romanko, O. “Digital Opportunity: How Cloud Computing Changes the Shape of the UK Economy” Brown Bag Seminar Series, The Productivity Institute, 18 May 2022 

Tong Koecklin, M. and Coyle, D. ‘Are Digital-Using UK Firms more Productive?’ Brown Bag Seminar Series, The Productivity Institute, 20 April 2022 

Coyle, D. and Msulwa, R. “Digital Concrete: productivity in construction“, CRIW Conference on Technology, Productivity, and Economic Growth?National Bureau of Economic Research, 17-18 March 2022 

Coyle, C. and Li, W. “The Data Economy: Market Size and Global Trade” 36th?Annual Virtual General Conference, Session 23: National Accounts, IARIW, 23-27 August 2021 

Romanko, O. “Digital Opportunity: How Cloud Computing Changes the Shape of the UK Economy” 36th?Annual Virtual General Conference, Session 2: The Potential and Challenges of Big Data and other Alternative Data in the Production of Prices, National Accounts, and Measures of Economic Well-Being, IARIW, 23-27th?August 2021 

Coyle, D.”The Data Economy: more questions than answers” Technology-Enabled Disruption: Implications for Business, Labor Markets and Monetary Policy Federal Reserve Banks of Atlanta, Dallas and Richmond, 21 May 2021 

Coyle, D. ‘ Why digital is so disruptive’ Royal Economic Society Annual Public Lecture 2021, 6 May 2021 

Posters: 

Coyle, D. and Msulwa, R. ‘Digital Concrete’ ESCoE Conference on Economic Measurement 2022, Poster Exhibition, University of Strathclyde, 25-27 May 2022

Blogs: 

Coyle, D. and Msulwa, R. ‘Digital Concrete: Productivity in Infrastructure Construction’ ESCoE blog, 29 September 2022 

Coyle, D., Lind, L., Nguyen, D. and Tong Koecklin, M. “Are digital-using UK firms more productive?” ESCoE blog, 10 March 2022 

Coyle, D. and Li, W. ‘The data economy market size and global trade’ ESCoE Blog, 2 Aug 2021 

Video: 

Richard Heys, ONS keynote interview with Diane Coyle ESCoE Conference on Economic Measurement 2023,  King’s College London, 17-19 May 2023 

Media:

Coyle, D ‘The digital economy’s growing ‘time tax’’?Op Ed Contribution, The Gleaner,?Jamaica, 5 July 2024? 

Birch, D “Scrooge?McData” Forbes UK?, 27 Aug 2021