The impact of regulatory quality on the digital economy: new insights from Italian regions

Purpose - This article seeks to ascertain whether institutional quality has a positive impact on the digital economy. Design/methodology/approach - By minimizing heterogeneity concerns, we examine the direct impact of regulatory quality upon digital economy using an informative homogenous sample of twenty Italian regions from 2004 to 2019. To address simultaneity and endogeneity concerns, a 2SLS technique was used. Findings - The empirical findings support the positive impact of regulatory quality on the digital economy. As a result, the most virtuous regions in terms of effective regulation execution encourages the development of the digital economy, with favorable consequences on economic activity and the path of the economic growth. Practical implications - This paper provides new insights into how institutional quality enhances digital economy, offering valuable implications for policy development aimed at contributing economic growth. Originality/value - The digital economy has evolved significantly over time, forcing businesses to adjust, especially by promoting smart and agile working practices. This paper adds to the body of existing literature examining whether institutional quality—in particular, regulatory quality—contributes positively to the digital economy.