Economy Digitalization: Information Impact on Market Entities

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 654-658

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

Economy Digitalization: Information Impact on

Market Entities

Indira G. Salimyanova *, Aleksandr A. Novikov ²^,³, Elena V. Novikova ³^,², Irina V.

Lushchik , Alina F. Savderova , Natalia V. Berezina , Lyudmila G. Rudenko , Ruslan M.

Allalyev ⁸

Department of Innovation Management, St. Petersburg state University of Economics, St. Petersburg, Russia

Department of National Economics, the Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia

Department of Economics and Finance, Moscow International University, Moscow, Russia

Department of Finance and International Settlements, Monetary and Credit Relations, Russian Foreign Trade Academy, Moscow, Russia

Department of Finance, Credit and Economic Security, Chuvash State University, Cheboksary, Russia

Faculty of Economics and Finance, Moscow Witte University, Moscow, Russia

Department of Civil Legal Disciplines, Plekhanov Russian University of Economics, Moscow, Russia

Received: 25/07/2019

Accepted: 01/09/2019

Published: 02/092019

Abstract

The development of priority areas of science and technology - locomotive industries that stimulate innovation activity of the

economy as a whole supports the development and competitiveness of national economic systems. Nowadays there is a problem of

changing the system of priorities generated by the fourth industrial revolution and its key direction – digitalization. The purpose of

the article is to assess the impact of the digital economy elements on modern socio-economic processes. The authors present an

analysis of industrial revolutions and their projections for further economic and technological breakthroughs. Based on an

interdisciplinary approach and based on well-known institutional economic theories, the authors identify new economic trends

emerging in the digital economy. The theoretical forecast of the economic market subjects’ behavior in the conditions of information

influence is executed.

Keywords: Economy Digitalization, Socio-Economic Processes, Economic and Technological Breakthroughs, Digital Economy

taking steps to accelerate digital development. According to

the Organization for economic cooperation and development,

Introduction

Increased attention to the problems of digitalization of the

areas of social and economic life can be noted not only in

Economics but also in social development and psychology (7,

32 of the 36 member countries of the organization, as well as

partner countries have national digital strategies. Large-

scale programs for the development of the digital economy

operate in the US, China and the European Union countries.

According to Boston Consulting Group data, the share of

digital technologies in GDP has tended to increase in the last

decade in different countries. Thus, according to 2018, the

absolute leaders in the share of digital GDP are the US with

4, 15, 17, 20, 26). This indicates

significant

interdisciplinary connection between the problems of

integration of digital technologies in the life of both

individual subjects, social groups and institutions. The study,

according to the authors, among other things, is also relevant

due to the following reasons. The introduction of new digital

technologies increases productivity, reduces business costs,

increases the availability of information and reduces barriers

to entry into new markets – and has a multiplier effect on the

development of the economy as a whole. Being aware of the

high importance of digital technologies, many countries are

25% and China with 13%. With the ratio of digital to global

GDP, the US owns 25% of digital GDP and 35% of global

GDP, China — 25% of global GDP. However, this figure is

growing more rapidly than in other countries. The digital

share of French GDP of slightly more than 8%, share of the

digital German GDP was slightly less than 8%. The

remaining countries' digital GDP is well below global GDP

(

10).

All digital technologies have significantly changed the

Corresponding author: Indira G. Salimyanova, Department

of Innovation Management, St. Petersburg state University of

world, and there has been a total change in business models.

The modern development of markets is characterized by an

Economics,

St.

Petersburg,

Russia.

E-mail:

saliindira@yandex.ru.

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 654-658

increasing use of technological solutions. Investments from

traditional sectors are increasingly flowing into digital ones.

Moreover, in the global aspect, this leads to a high degree of

market uncertainty, as well as competitive risks caused not so

much by economic factors as by social and political trends in

recent years. Together, this creates an institutional

environment in which market actors interact. The study of

trends in this environment is relevant in the context of the

expansion of theoretical views and approaches in the field of

institutional Economics, as well as due to the high dynamics

of the digital economy.

driving force of science there is an optimization of the system

of involvement in the production of a new generation of

specialists capable of creating

highly intelligent

environment focused on the development of the digital

economy. Thus, the fourth industrial revolution, which is

multifaceted and affects such indicators as investment, gross

domestic product, productivity, education, consumption,

trade, employment, inflation, etc., will lead to irreversible

transformation in production and business (2, 3, 9).

Therefore, there is a need for new responsive mechanisms for

the transition of all systems to the digitization in all spheres

of life, which is they should be supplied by the new

regulatory challenges, developed a new scheme of data

management, and solved educational problems of specialists’

training of a new type, capable to exist in the new digital

culture.

Materials and Methods

.1 Digitalization as a Result of the Industrial Revolution

The digital economy as a modern key direction was

proclaimed at the 46th world economic forum, held in Davos

in 2016. The motto of the forum Leading the Fourth

industrial revolution was defined by K. Schwab (2016); this

revolution is "a mixture of technologies of the physical,

digital and biological world, which creates new opportunities

and affects political, social and economic systems". The

author, considering the importance of revolutionary changes

in the development of society, identifies the following

periods of industrial revolutions:

.2 Information base and research methods

The information base for the study is the official data

sources, as well as the analysis of the experience and practice

of a number of large and medium-sized enterprises operating

in Russia in the fields of industrial production and

information technology. The study was conducted through

audits and in-depth interviews with company executives. The

basis of the study was the institutional approach system of

cognitive principles that focus on the interpretation of

historical reality in line with institutional theories developed

in various fields of social and humanitarian knowledge (13,

1. The first industrial revolution (1760-1840s), is

characterized by the construction of Railways, the invention

of the steam engine, the development of mechanical

production.

23). While analyzing institutional approaches in the field of

2. The second industrial revolution (Late XIX –mid XX

sociology and at the same time analyzing them from

economic positions, it is impossible not to pay attention to the

problems of institutional dynamics, and what social

phenomena are the basis of consumer preferences and

expectations are. Therefore, N. Fligstein (1996) identifies

three main elements:

century), is characterized by the spread of electricity and the

introduction of the conveyor, the emergence of mass

production.

3. The third industrial revolution (the Beginning of 1960

ies of XX century – the end of XX century), is characterized

by the development of semiconductors, electronic computing

machines, personal computers, the Internet.



Institutional

formations,

[institutional

arrangements], allowing agents to organize their activities in

the markets;

4. The fourth industrial revolution (the beginning of the

XXI century now), is characterized by mobile

–

communication and the spread of the Internet, miniature

production devices, the development and application of

artificial intelligence in all fields of knowledge, digital

technology, the development of biological engineering;

flexible interaction at the global level of virtual and physical

systems of production forms.



Motivational structure of agents [structure of

incentives], which determines the immediate motivational

reasons for their actions;



Concepts of control [conceptions of control], helping

to develop an understanding of business processes and

strategies for their own actions.

Radical technological breakthroughs based on software,

characteristic of the third industrial revolution, are being

modified every year, becoming perfect, transforming

production and economic activities, improving the quality of

life. The second machine age is not only about smart and

interconnected machines and systems. Its range of action is

much wider. At the same time, there are waves of further

breakthroughs in a wide variety of areas: from decoding

information recorded in human genes up to nanotechnology,

V.V. Radaev (2001) defines institutional entities as rules

that are both the basis and the result of economic actions.

Their structure includes the following basic elements:

property rights; management structures; exchange rules. In

the context of the high dynamics of the modern world, it is

noteworthy to define the institutional dynamics of H.

Schelsky (1970), according to which the dynamics is the

basic circumstance for social change due to the continuous

process of production of new needs.

from renewable energy up to quantum computing.

According to the authors, the following institutional

theories should be considered in the context of the topic:

distinctive feature of the last industrial revolution from the

previous three is the self-synthesis of innovative technologies

into increasingly advanced and efficient ones, that is, the

development of technologies is exponential. The speed of the

avalanche-like flow of innovations, the pace of their

development and diffusion are unprecedented. Based on the



the theory of property rights, in which in addition to

the work of R. Coase (2007) "The firm, the market and the

low" and A.A. Alchian (1977) "Economic forces at work" we

allocated the classification of A.M. Honoré (1961), namely:

Journal of Environmental Treatment Techniques

2019, Volume 7, Issue 4, Pages: 654-658

ownership, use, management, sovereign rights, perpetual

rights and the rights of ownership non-use to the detriment;

example, we can trace the following pattern, which is based

on the above-defined information influence: the emergence,

development and availability of technologies for the creation

and transfer of information content greatly facilitates the

actions of subjects in the field of promotion of views,

opinions, ideas; this in turn expands the capabilities of each

individual subject - consumer to conduct an active social life

and position that can be perceived by such a subject as their

own development and well-being; private social activity

naturally generates demand and economic supply, which is

expressed not only in increasing the number of non-profit

organizations, but also in the development (primarily) of

small businesses that are ready to provide services, for

example, in the field of crowdfunding.



The theory of transaction costs, considering the

transaction as the basic unit of analysis of market

participants’ interaction. The nature of the theory is

microanalysis, behavioral analysis, study of the specificity of

assets, etc. O. Williamson (1996) in "The Economic Insights

of Capitalism" indicates that the activities of modern

organizations are largely based on minimizing transaction

costs. It is important to note that it is necessary to study the

elements of this theory, which are acquiring a completely

new meaning in modern conditions;



the theory of optimal contract (authors – Nobel

laureates, 11), which determines the system of relationships

in determining the terms of the contract in terms of error in

the information space of the transaction or the specifics of the

integration of agents in the process of their economic

interaction. In addition to conflict resolution, contract theory

explores opportunities to increase trust between the parties

and contributes to the development of General terms and

conditions of contracts and agreements;

It is appropriate to evaluate the information impact from

the standpoint of institutional analysis: on property rights

(theory of property rights); the theory of transaction costs; the

theory of optimal contract; the theory of public choice. The

result is presented in table 1.

It is clear from the table that at present:

1) property rights and opportunities for their use by the

owner are limited economically and socially, namely, on the

one hand, by the problem of saving resources, reducing costs

and the production of a competitive product, and on the other

hand, by public control (analysis in the framework of the

theory of property rights);



the theory of public choice (5), which studies the

various ways and methods by which people use government

agencies and public institutions in their own interests, the

subject of its analysis is the decision-making process in both

external and internal uncertainty. The theory explores the

processes taking place in society, the correspondence of

public choice to the real preferences of society and the

conditions of their convergence. The theory is of research

interest because of the transformation of political and social

institutions, as well as the gradual change in the priorities of

national economies.

2) Transaction costs are directly affected by information,

i.e. trend — information impact. Firstly, transaction costs

vary depending on the application of modern information

technologies to the process of concluding an economic

transaction — contract; secondly, the social side of the issue

is as follows: the adoption and approval by the society of

information technologies’ use, as well as the availability of

confidence in this is a key factor influencing the economy of

the transaction. Thus, the main conclusion on the theory of

transaction costs is the convergence of economic and

sociological approaches. It is important to note that the focus

of the theory shifts from the description of the behavioral

characteristics of the subject to the analysis of the behavioral

aspects of social groups (analysis in the framework of the

theory of transaction costs);

Results

The development and structure of modern markets is

determined by the nature of factors that reflect the objective

processes taking place in the world economy. The nature of

the factors is, first, technological development, and especially

data transfer and storage technologies; second, increased

political and economic competition between developed and

developing countries; and third, changes in consumption and

choice patterns that threaten the development of traditional

sectors of the economy in the medium term.

The modern role of information is remarkable, which can

be considered both as a means of production of services (for

example, introduction into social rating systems of

individuals and legal entities), and as a product that has an

impact on economic decision-making (information on the

financial solvency of the contractor). At the same time,

information does not pose a threat to traditional industries,

but rather expands their capabilities through the emergence of

appropriate technologies of cloud solutions, technologies of

Internet of things, big data, etc.

3) It is possible to implement the concept of smart

contracts, described in the work of N. Szabo (1994). Its main

idea is that almost all types and terms of contracts related to

obligations, information protection and property rights could

be implemented using digital technologies. The deal made by

the principals will strive for optimality, and the negative

impact of opportunism and asymmetry of information will be

minimized. This should be achieved through the operation of

a special computer Protocol, which is based on algorithms

that allow automating the transaction, while the Protocol

provides full control of the transaction.

4) Economics and politics in the theory of public choice

act as mutual prerequisites, interact with each other, and

constantly move one into another.

Thus, the trend of information influence has a global

impact on the development of socio-economic systems. For

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2019, Volume 7, Issue 4, Pages: 654-658

Table 1: Analysis of information impact in the context of institutional analysis

Impact analysis

Institutional theory

Type of right

Degree of influence

The development of the information technology market reduces the cost of property

control due to the technical capabilities for rapid access to information from anywhere

Information technologies provide the owner with previously unavailable opportunities

for investment planning and analysis of the counterparties' activities

Possessions

Use

The procedure of granting rights to contractors for access to resources or property is

simplified. This reduces transaction costs and allows you to refuse the services of

intermediaries

management

Theory of property rights

Due to the development of information transparency and the availability of third parties

to control the actions of the owner, the owner him/herself may be limited in the rights to

dispose of property in view of the obligations to third parties

The trend has a significant impact on the market and contributes to the emergence of

products with limited ownership over time. This could include any cashiering services

when the owner is limited to the time of use of the product

Sovereign right

Perpetual right

In this case, only the level of development of the information society can put before the

owner a moral barrier to the use of property to the detriment of third parties. Often

reputation costs can be extremely high

not using the property

to harm

ex-ante transaction costs

kinds

Characteristic

The use of IT technologies in the preparation of the contract allows integrating the

Drafting

projects

documents

and

contract

other

most complex aspects of economic exchange (transaction) in the General planning

scheme, which contributes to the drafting of the most complete contract. The speed

of dissemination of information allows you to respond quickly to the actions of the

counterparty. Transaction costs are reduced, but variables are growing

Extensive opportunities for the creation and storage of information content on the

one hand allow more complete use of all open sources of information, but on the

other — it leads to the emergence of garbage sources. The cost of negotiations is

increased by the need to process an array of information. In the future, such costs

will be reduced due to the emergence of new algorithms for information analysis,

which does not exclude variable costs

economic exchange

Negotiation

Transaction cost theory

Guarantee provision

Does not affect the problem of contract guarantee costs

Ex-post transaction costs

kinds

Characteristic

It is expressed in the development of IT able to predict the outcome of economic

exchange, causing the possibility of creating the optimal configuration of the

Adapting to unexpected contract for contractors. It is also evident in the implementation of the current

events

monitoring of the contract, when due to the growth of sources of information there

are many opportunities to fully assess the parameters of the transaction at the

implementation stage and, thus, reduce the ex - post cost.

The exact fulfillment of the

Does not affect the problem of costs for the exact fulfillment by the counterparty of

obligations under the contract

obligations

contract

under

the

Circumstances

Decision

The opportunism and the asymmetry Reducing the generation of unproductive (including alternative (imputed)

of the contract

Contract design goals

Problems

costs increases the efficiency of resource allocation.

. Controllability (observability), as the ability of participants to monitor

the performance of each other's contract or to prove their effectiveness to

other principals.

Optimal contract theory

. Verifiability, as the principal's ability to prove to the arbitrator that the

contract has been performed or breached, or the arbitrator's ability to find it

in other ways.

. Privacy, as the principle that information and control over the content

and performance of the contract should be distributed between the parties

only to the extent necessary for the performance of this contract.

Degree of influence

The problem of pricing and market Information, especially on the actions of state institutions in the field of

deficits, as well as the elimination or regulation of the electronic economy, significantly affects the actions of

limitation of market competition in market participants. (Example – the collapse of bitcoin). The information

the field of electronic economy

in this case is of significant investment interest

Public choice theory

State institutions of power do not always have the opportunity to receive

reliable information about the state of the market and make the right

decision.

The probability of making a false

decision at a high (state) level

Restriction of subjects in the right to It is possible only in the case of prohibitions on access to sources of

make economic decisions

information through technical blocking.

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2019, Volume 7, Issue 4, Pages: 654-658

Transparency and openness of information creates the

need to create flexible mechanisms that can balance the

economic basis of behavior in the political process and the

political methods of intervention in the market economy,

since the prohibitions within the framework of information

influence are unproductive (27).

economic processes (adaptation or withdrawal from the

market)

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Discussion and Conclusion

Economic theories, in contrast to sociological theories,

appeal to the behavior of market participants, whose actions

are carried out in the existing institutional environment.

The behavioral characteristics of subjects are Central in

institutional economic theories. The views expressed in

economic theories give an idea of the consequences of

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of social nature, which are fundamental. In turn, sociological

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Information technology, which is part of the digital

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it the fact that modern society and markets are not always

ready to accept and use information technologies, even

despite the reduction of possible costs. This once again

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According to the authors, the issue of trust also depends on

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First, under the influence of trends, there are changes in

the institutional environment, as modern solutions (especially

digital) lead to the emergence of new institutions and the

abolition or transformation of old ones; secondly, we can

increasingly talk about the strengthening of the influence of

external factors (primarily socio-political), which have a

destructive impact on the development, as a whole industry

areas, and individual companies. This makes it more urgent

for market players to reduce costs in the medium and long

term and overcome isolation barriers; thirdly, in solving

problems related to the economic development of the Russian

Federation, the public role is increasing, reflecting the

position of audiences on the effectiveness of the functioning

of domestic political and economic institutions. In this case,

the mechanisms of the digital economy, providing feedback,

come to the first place; fourth, the digitalization of the

economy enhances the competitiveness of both traditional

market sectors, and contributes to the refinement of strategic

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