Surabaya- Investment in research and development has emerged as the strongest driver of Indonesia’s economic growth, while rapid growth in e-commerce transactions and internet usage has not yet translated into positive economic gains. This conclusion comes from a 2026 study by Keefie Rahino Herdana, Riko Setya Wijaya, and Putra Perdana from the Faculty of Economics and Business, Universitas Pembangunan Nasional “Veteran” Jawa Timur, published in the East Asian Journal of Multidisciplinary Research.
Analyzing Indonesia’s economic performance from 2015 to 2024, the researchers examined how R&D investment, e-commerce transactions, and digital infrastructure affect national economic growth. Their findings challenge common assumptions about the digital economy: while innovation spending clearly boosts growth, digital consumption and internet expansion alone may slow it if not supported by strong domestic production and human capital.
The results matter for policymakers and business leaders as Indonesia continues to position its digital economy as a key engine of long-term development.
Digital optimism meets economic reality
Over the past decade, Indonesia has experienced steady economic growth, interrupted only by the COVID-19 shock in 2020. During the same period, the country’s digital economy expanded rapidly. Internet penetration rose sharply, online shopping became part of daily life, and e-commerce platforms grew into major economic players.
This digital surge has often been framed as a guaranteed pathway to economic growth. However, the research by Herdana and colleagues shows that the relationship is more complex. Digital activity does not automatically generate higher national income, especially when domestic industries are not fully integrated into digital value chains.
The study places Indonesia’s experience within a broader global debate on whether digitalization always leads to productivity gains, particularly in developing economies.
Simple data, comprehensive national coverage
The researchers used a quantitative time-series approach, drawing on official data from Statistics Indonesia (BPS), the World Bank, and Statista. The analysis covered a ten-year period, allowing the authors to observe long-term trends rather than short-term fluctuations.
Economic growth was measured using real Gross Domestic Product (GDP) growth rates. R&D investment was represented by national R&D expenditure as a share of GDP. E-commerce activity was measured through the total value of online transactions, while digital infrastructure was proxied by internet penetration rates.
By applying a multiple regression model, the study assessed how each factor influenced economic growth individually and collectively. The model explained more than 90 percent of the variation in Indonesia’s economic growth, indicating a strong and reliable relationship between the variables analyzed.
R&D investment shows a strong positive effect
The most consistent and significant finding concerns research and development investment. Higher R&D spending was strongly associated with faster economic growth in Indonesia throughout the study period.
This result supports long-standing economic theories that emphasize innovation, technology, and knowledge creation as foundations of sustainable growth. R&D investment enhances productivity, improves production efficiency, and strengthens industrial competitiveness.
The authors note that R&D generates benefits beyond individual firms. Innovation diffuses across sectors, raises overall productivity, and creates new economic opportunities. In this sense, R&D acts as a long-term growth multiplier rather than a short-term stimulus.
Herdana and his colleagues emphasize that innovation-driven growth is especially important for countries seeking to escape middle-income traps and compete in global markets.
E-commerce growth does not guarantee economic expansion
In contrast, e-commerce transactions were found to have a negative and statistically significant relationship with economic growth during the same period. As online transaction values increased, overall economic growth tended to decline slightly.
The researchers caution that this does not mean e-commerce is harmful. Instead, it reflects structural challenges in Indonesia’s digital economy. Much of the value generated by online transactions does not stay within domestic production systems. Imported goods, weak local supply chains, and limited value-added activities reduce the growth impact of rising digital consumption.
The findings align with international observations that digital markets require “analog complements,” such as skilled labor, effective regulation, and strong institutions, to generate broad economic benefits.
Internet expansion faces a productivity paradox
The study also found that digital infrastructure, measured through internet penetration, had a negative effect on economic growth. This outcome reflects what economists describe as a digital productivity paradox—a situation where technology adoption increases, but productivity gains lag behind.
According to the authors, many Indonesian businesses and regions are not yet ready to fully utilize digital infrastructure. Limited digital literacy, uneven access to skills, and weak integration between online platforms and productive sectors reduce the economic impact of widespread internet access.
The researchers draw parallels with similar patterns observed in advanced economies during earlier phases of information technology adoption, where productivity gains appeared only after complementary investments were made.
Policy implications for Indonesia’s digital future
The findings suggest that Indonesia’s growth strategy should prioritize quality over quantity in digital development. Expanding internet access and e-commerce platforms is not enough without parallel investments in innovation capacity, workforce skills, and domestic industry.
The authors recommend strengthening public and private R&D funding, offering incentives for innovation, and expanding collaboration between universities, industry, and government. R&D investment, they argue, is the most reliable driver of long-term economic growth.
For e-commerce, policies should focus on supporting local producers, improving logistics, and encouraging digital platforms to integrate domestic value chains. Digital infrastructure development should be accompanied by training, education, and institutional reforms that enable productive use of technology.
As the authors ethically paraphrase in their discussion, Herdana and colleagues from Universitas Pembangunan Nasional “Veteran” Jawa Timur emphasize that “digital transformation can support economic growth only when innovation, human capital, and production capacity grow together.”
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