The World Bank’s annual Doing Business survey has been described by some as the “World Cup” or “Olympics” for governments competing to make their countries attractive to businesses. The ranking measures how easy it is to do business in a country by examining regulatory environments and is enormously influential: it has inspired more than 3,500 reforms across 190 economies; in 2017-18 alone, 128 economies undertook a record 314 reforms.
While this attention to policy responsiveness is admirable, a key element is missing from rankings such as Doing Business: they say little about the ease or difficulty of doing digital business. We aim to close this gap with the first analysis of the Ease of Doing Digital Business in 42 countries around the world. We picked these countries because they constitute the most significant markets for digital businesses worldwide and offer a consistent set of data across a wide range of indicators. We find that digital business environments require distinctive policy focuses and investments. Our evaluation is intended as a complement to that of the World Bank; it provides decision-makers a basis to compare countries not only in terms of “traditional” business-friendliness but also in terms of factors affecting setting up digital businesses.
While all businesses have elements of digital technology built into them, we define “digital businesses” as ones that have a digital platform as core to its business model. We analyzed four essential digital platforms: ecommerce platforms (e.g. Amazon, eBay); digital media platforms (e.g. YouTube, Netflix); sharing economy platforms (e.g. Uber, Airbnb); and online freelance platforms (e.g. Upwork, Toptal).
Arguably, digital businesses represent one of the most dynamic growth aspects of most major economies. In the U.S., for example, the digital economy grew 3.7 times faster in the 11 years through 2016, compared to the economy as a whole, according to the Commerce Department’s Bureau of Economic Analysis.
We considered some of the particular challenges digital businesses face:
- They grow or shrink at different speeds and are governed by several factors that are specific to the digital ecosystems.
- They face unique market resistance and competition.
- Digital businesses present nuanced regulatory challenges. Rules governing the mobility of data, protection of user privacy, or net neutrality can fundamentally affect the ease of doing digital business – and these rules vary across countries.
- Given their strategic value, digital businesses can be particularly important to governments. The U.S.-China rivalry is an example. Many international digital business that have tried and failed to enter China while the U.S. is home to many powerful tech companies and the U.S. government has hit companies such as Chinese digital giant, Huawei, with particularly stringent restrictions.
There are numerous other infrastructural factors that are idiosyncratic to digital businesses, such as digital access and adequate bandwidth, institutional enablers for creation of digital content and internet censorship as well as the availability of talent. Despite the power of the digital economy, these factors are not as well understood, benchmarked across countries or systematically evaluated for action by policymakers, business leaders, and investors.