ICT Adoption, Innovation, and Labor Productivity in ASEAN: Evidence from Panel Data Analysis

Abstract

Why do stark productivity disparities persist in ASEAN despite rapid digitalization? This study investigates the divergent drivers of labour productivity in the advanced ASEAN-6 and the catching-up ASEAN-10 from 2000–2023. Employing dynamic panel models, we demonstrate a fundamental dichotomy. In ASEAN-10, basic internet access and foreign direct investment (FDI) are the primary catalysts, enabling catch-up growth. Conversely, in the more developed ASEAN-6, productivity is driven by frontier innovation - specifically, patentable outputs and long-term R&D - while broad digital expansion yields diminishing returns. Critically, we identify an innovation - productivity paradox: composite innovation inputs show negative returns, whereas tangible patent applications consistently enhance productivity. The findings prescribe a bifurcated policy approach: ASEAN-10 must focus on technology diffusion and strengthening intellectual property, while ASEAN-6 should prioritize mission-oriented R&D and enhancing the commercialization ecosystem to escape the middle-income trap.