Institutional Change Within the Context of Digital Economy

Abstract

Digital technologies including artificial intelligence, digital platforms, blockchain, Internet of things etc. have spread rapidly. The paper deals with the effects of these technologies on the quality of the institutional environment. A literature review is focused on the impact of digitalization on changing institutional environment both in Russia and abroad. The author identifies both the positive and negative effects of new and emerging digital trends, including related risks and threats for the economy. As recent literature shows, digital technologies affect institutional environment both directly and indirectly. Some of these effects include transaction cost reductions and hence destruction of existing institutional traps. When extrapolating this trend into the future, the problem of ``death of institutions{''} evidently becomes an unlikely scenario. At the same time, the Coase theorem prediction is likely to manifest itself. Digital technologies may transform existing institutions and even destroy them. Institutional vacuum emerges in particular fields, with the new digital technologies remaining uninstitutionalized, and this factor may impede or constrain digitalization for a long time. The economic impact of digital technologies, as well as its consequences, are outlined. Qualitative institutional change which results in the digitizing processes are defined as involving institutions themselves, both existing and emerging, change in their efficiency, destruction of the existing institutional traps and emergence of the new ones, and occurrence of an institutional vacuum. Principles of institutional design are suggested as the tool for institutional adjustment within the context of the digital economy.