The research inquiry in this study is driven by four primary considerations: (1) the potential of information and communications technology (ICT) penetration in all sectors of the global and regional economies; (2) the challenge of achieving the Sustainable Development Goal (SDG) 16, which emphasises the establishment and promotion of strong and inclusive institutions on a global and regional scale; (3) the significant potential of ICT penetration (ICTP) to enhance institutional quality globally and regionally; and (4) the crucial need to explore these interconnections within the context of the study. Additionally, the presence of research gaps in the empirical literature on institutions necessitates attention and further investigation. Information and communications technology has revolutionised the way societies operate, transforming various sectors, including communication, commerce, education, and governance. The widespread adoption and penetration of ICT have raised important questions about its impact on institutional quality, which encompasses the effectiveness, efficiency, and integrity of institutions in a given country or region. Understanding the relationship between ICT penetration (ICTP) and institutional quality, is crucial for policymakers and researchers aiming to leverage technology for sustainable development and improved institutional performance across the global.

In a study conducted by Alonso and Garcimartín (2013) the determinants of institutional quality are investigated and revealed that factors such as development level, tax system, and income distribution positively influence institutional quality. Building upon this research, Alonso, Garcimartín and Kvedaras (2020) extended the study by exploring additional variables that might determine institutional quality. The findings of their study affirmed that institutional quality is influenced by variables that could be shaped by public policy, including international openness, education, and others. In Entele’s (2021) study, the fixed-effect panel data model is employed to examine the influence of institutions and ICT services on avoiding the resource curse in successful economies from 1995 to 2019. The findings demonstrate that some economies experience negative economic growth in fact due to abundant natural resources and institutional performance, indicating the presence of resource and institutional curses. However, overcoming these curses is possible through the development of human capital, adoption of ICT, and improvement of institutions. In recent years, different empirical studies support the institutional quality – economic development nexus. Additionally, although to a lesser extent, evidence has also suggested a connection between institutional quality and growth (Aron 2000). The positive/negative/mixed relationship between institutional quality and economic development has been highlighted in cross-country investigations in previous studies (see for example, Acemoglu, Johnson & Robinson 2002; Easterly & Levine 1997; Hall & Jones 1999; Lio, Liu & Ou 2011; Rodrik, Subramanian & Trebbi 2004; Shim & Eom 2008), panel data analyses (Henisz 2000; Shirazi 2008; Tavares & Warcziarg 2001; Varsakelis 2006) and case studies (e.g., Rodrik 2003), among others. In these studies is explored the relationship between institutional quality and economic development, or growth, considering various macroeconomic and socioeconomic variables, yielding either positive, or negative, or mixed results. Since there is a lack of comprehensive studies examining the nexus between ICT penetration (ICTP) and institutional quality at both global and regional levels, it is essential to fill this gap. This research offers a more balanced understanding on how ICT influences institutions on a global and regional scale. And such insights could help policymakers to make well-informed decisions, ultimately leading to more precisely targeted policies and strategies for international institution. Offering insights into the previously unaddressed causal relationship between global and regional ICT penetration (ICTP) and institutional, will shed light on the specific pathways through which ICT impacts institutions. Understanding these mechanisms is crucial to designing effective policies and interventions to harness the benefits of ICT for governance and institutions, thus enhancing policy recommendations and providing a deeper understanding of maximising these benefits which is expected to lead to improved and enhanced economic/social development.

To the best of our knowledge, in no previous study has the institutional quality effect of ICTP at global and regional levels been investigated. Moreover, the scope of previous studies is constrained by limitations to the study period and the number of countries examined. Furthermore, some of the methodologies employed, fail to address important aspects, such as panel data issues and robust endogeneity. This research sets itself apart from previous literature by creating a composite index for ICT, which includes three variables, as well as an index for institutional quality, derived from six governance indicators, using principal component analysis (PCA). Thus, the aim with the present analysis is to bridge these gaps by utilising the endogeneity-robust Two-Step System-Generalized Method of Moments (SGMM) estimation approach that incorporate forward orthogonal deviations to generate reliable empirical findings (Saba et al. 2023). We employed the SGMM approach for several reasons. Firstly, it is known for its efficiency in dynamic panel data models, offering more precise parameter estimates (Wooldridge 2001). Secondly, it is robust in addressing endogeneity issues, a common challenge in econometrics (Wooldridge 2001). Thirdly, it allows for a greater number of momentary conditions, accommodating complex data structures (Wooldridge 2001). Lastly, it could be applied even when assumptions like homoskedasticity fail, rendering it versatile in various real-world scenarios (Wooldridge 2001). The fundamental/main research question which previous studies failed to address, and we seek to answer globally and regionally, is how they can achieve improved institutional quality by employing their sustainable policy instruments around ICTP. Therefore, the primary objective of this study is to explore the institutional quality effect of ICTP from both global and regional perspectives. By examining empirical evidence and conducting a comprehensive analysis, we could gain valuable insights into the relationship between ICT and institutions, and the potential mechanisms through which ICT influences institutional quality. We also examine the direction of causality between institutional quality and ICT penetration by applying the Dumitrescu-Hurlin (2012) panel causality technique to determine the causal relationship between the two variables.

On a global scale, understanding the overall relationship between ICT penetration and institutional quality will provide an opportunity to uncover: (1) the contribution that ICT penetration has made to the progress of institutional development, (2) the evaluation of additional control variables that may influence institutional quality, and (3) the establishment of a basis for policy recommendations and interventions at global level. However, it is also important to recognise that the impact of ICT penetration on institutional quality may vary across regions, due to the difference in socioeconomic context, level of technological advancement, and institutional framework. Therefore, the aim with this research is also to provide regional perspectives on the institutional quality effect of ICTP. The regional analysis will facilitate the identification of region-specific challenges and opportunities, enabling policymakers to design tailored strategies to enhance institutional quality through ICT development. The insight from this study will inform evidence-based policymaking, guide strategic interventions, and support the formulation of effective ICT policies, aimed at improving institutional quality.

The organisation of this paper is as follows: In Section 2 the review of previous studies is presented. In Section 3 the methodology and data are presented. Results from the empirical analysis are presented and discussed in Section 3. Finally, Section 4 is concluding with policy recommendations.

ICT penetration refers …

On the one hand, studies on the growth nexus of the ICT-institutions often reveal a favorable relationship, particularly in developed countries, considering these three variables. However, scholars and international organisations, such as Erdil, Yetkiner and Türkcan (2010), Simmie (2015), Entele (2021), Saba and Ngepah (2022c), the World Bank Group (2016), and many more, have highlighted through their studies the increasing significance of ICT in enhancing returns on investment, growth and productivity. On the other hand, some studies have unveiled a bidirectional causal relationship between ICT and growth, as exemplified by Veeramacheneni, Ekanayake and Vogel (2007), Saba and Ngepah (2022c), and Erdil et al. (2010), among others. However, this does not necessarily imply that mere access to ICT services and infrastructures will inevitably lead to greater growth. This is because the process of adapting to and embracing ICT at the global and regional levels requires the presence of institutions and good governance structures (Asongu & Nwachukwu 2016).

In line with Hellstrom (2008), ICT enhances institutions by promoting accountability, transparency, and information flow. ICT enables citizen engagement and information sharing both within and outside formal settings, hence, fostering societal connectivity and innovation. Having this in mind, Bailard (2009:337–339) theorises that limited ICT access among the elite in developing countries allowed corruption to thrive in institutions/societies. The gradual proliferation of ICT, among citizens, has diminished corruption opportunities and enhanced transparency, breaking the secrecy barriers. This theory aligns with Hellstrom’s (2008) idea of ICT reducing elite information monopolies. Enhanced ICT infrastructure, encompassing accessibility, skill levels, and usage, influences institutional quality. Studies by Lio et al. (2011) and Shim and Eom (2008) reveal that ICT adoption reduces corruption. Robust ICT infrastructure also promotes freedom of expression, fostering government accountability and institutional quality (Shirazi 2008). Information and communications technology services/infrastructure advances e-government, improving service delivery, administration, and citizen engagement as mentioned earlier (Kudo 2008), while Institutional indicators/factors could at the same time affect ICT development negatively, thereby potentially deepening the global digital divide (Asongu & Nwachukwu 2016).

Institutions, according to a commonly accepted definition, ‘are the humanly devised constraints that structure political, economic and social interactions’ (North 1991:97).

Despite this definition, there is an ongoing debate on this, mainly involving two approaches. In one view institutions are seen as rules established by humans, creating exogenous constraints on behavior to reduce transaction costs and bring regularity to interaction (the rule-based conception) (North 1990). According to this perspective, enforcing rules is seen as separate from their formation, and the efficiency and predictability of rules are crucial to assessing institution quality (Alonso et al. 2020; Greif 2006). Conversely, some consider institutions as mainly endogenous and self-enforcing equilibria (the equilibrium-based conception) (Alonso et al. 2020; Greif 2006). Here, enforcement is often endogenised, with institutions as equilibria in repeated games. These institutions motivate individuals to act as expected, emphasising credibility and legitimacy as important factors in institutional quality (Alonso et al. 2020; Greif 2006).

While these approaches are not necessarily incompatible, according to a more eclectic view institutional quality is judged on four criteria: predictability, static and dynamic efficiency, and legitimacy (Alonso et al. 2020). Other criteria for good governance, like impartiality in the exercise of public authority or state autonomy (Rothstein & Teorell 2008), are seen as means to achieve these four functions. Empirically, analysing variables associated with these criteria is essential. Recent studies in economic development provide some insights by investigating the emergence of nation-states and modern legal orders in Western economies (see for example, Fukuyama 2011, 2014, among others), showing how institutions address external threats and internal violence. Another focuses on transitions from non-democratic to democratic regimes, highlighting the impact of wealth and income distribution on institutions (see for example, Acemoglu and Robinson 2001, 2006; Boix 2003, 2015; etc.). A third explores the mutual interaction and evolution of economic, political, and institutional forces (for example, Besley & Persson 2011; Gradstein 2003, etc.). These approaches provide a multifaceted view on institutional quality.

Based on the above discussions, institutional quality, according to empirical literature, could be linked to some potential determinants, namely, level of development (Besley & Persson 2011), inequality (Acemoglu & Robinson 2011; Chong & Gradstein 2007), tax revenue (Baskaran & Bigsten 2013; Bräutigam, Fjeldstad & Moore 2008), openness (Alonso & Garcimartín 2013; Rodrik et al. 2004), levels of education (Alonso & Garcimartín 2013; Glaeser et al. 2007 Besley & Persson 2011), among others. As mentioned earlier, Alonso and Garcimartín (2013) examined factors impacting institutional quality, finding positive influences from developmental level, the tax system, and income distribution. Alonso et al. (2020) expanded on Alonso and Garcimartín’s (2013) study, by identifying further variables from the side of public policy that also shape institutional quality.

Despite the existing empirical literature on various factors influencing institutional quality, it is evident that prior studies have not delved deeply into the institutional quality – ICTP nexus at both global and regional levels. This omission has implications for policy recommendations, particularly those directed toward achieving SDG 16, which emphasises the establishment and promotion of strong and inclusive institutions. Additionally, previous research is limited by constraints in terms of study duration and the number of countries under examination. To address these gaps, an endogeneity-robust SGMM estimation approach is employed in the present analysis as mentioned earlier. This approach incorporates forward orthogonal deviations to yield reliable empirical insights into the institutional quality– ICTP nexus. The study covers a broad spectrum of 183 countries, spanning the period from 2003 to 2021. Furthermore, the countries are disaggregated into five major regions to provide a comprehensive analysis. By embarking on this analysis more thoroughly, policymakers could develop strategies to harness the potential of ICT to enhance institutional quality. The policy relevance of this study lies in its potential to derive evidence-based recommendations for governments and international organisations seeking to improve institutional quality through ICT interventions. Policymakers could gain insights into the institutional quality effect of ICTP and how these effects vary across regions. This information may guide the development of targeted policies and investments to enhance institutional quality, promote good governance, and contribute to achieving broader developmental goals.

As countries at global and regional levels work towards achieving the United Nations SDG 16, which emphasises the establishment and promotion of strong and inclusive institutions, there is a growing urgency to harness the power of ICTP to accomplish this objective. Hence, it is imperative to investigate the potential contributions of ICTP in advancing institutional quality on a global and regional scale. The study covers the period from 2003 to 2021, and we utilised the endogeneity-robust Two-Step SGMM estimation approach, incorporating the consideration of forward orthogonal deviations, which distinguishes it from the SGMM approach that neglects such considerations (Roodman 2009a, 2009b). This research sets itself apart from previous literature by creating a composite index for ICT, which includes three variables listed in Table 1, as well as an index for institutional quality, derived from six governance indicators listed in Table 1, using PCA. Additionally, it incorporates additional explanatory variables which can be found in Table 1.

This study contributes to the literature by presenting the following results. Focusing on our variables of interest, the estimation results using the endogeneity-robust Two-Step SGMM approach, indicate the following: (1) Across the full sample, as well as in the ECA and America regions, ICTP has a positive and significant impact on INSTQTY, highlighting its contribution to global and regional institutional quality. (2) However, in SSA, MENA, and ESAP regions, ICTP exhibits a negative and significant impact on institutional quality, indicating a retrogressive contribution to institutional quality in these specific regions.

To achieve SDG 16 here are some policy directions based on the findings of this study: (1) policymakers and governments at the global level should utilise ICT to gain deeper insight into the problems facing institutional development in order to further promote its contribution to institutional quality. Although ICTP contributes to the improvement of institutional quality on global scale, further policies that deepen global cooperation and investment in ICT development among governments should be innovated, implemented, and reviewed on a continual basis, considering the current global levels of rural – urban and gender digital divide (ITU 2021). (2) To enhance institutional quality in the SSA, MENA, and ESAP regions, it is essential for regional governments to establish and execute policies that encourage collaboration and investment in the ICT industry. Additionally, the governments should identify and address the challenges they may face in facilitating mutual access to the global ICT market. Considering the bidirectional causality observed between ICTP and institutional quality in the regions (SSA, MENA, and ESAP), it is crucial for policies in these regions to prioritise the establishment of transparent and accountable institutions. These institutions should promote fair competition, safeguard intellectual property rights, and ensure data privacy and security within the ICT sector. Such measures will encourage investment in ICT infrastructure and services while fostering trust and confidence among users. As these regions lag behind in ICT development, policies should also focus on building human capital in ICT to fully leverage its potential for institutional development. Governments should invest in digital skills training programs for both the general population and public officials, enhancing their capacity to utilise and benefit from ICT effectively. (3) Policies should further focus on maximising the benefits of ICT and promoting its widespread adoption for institutional development in ECA and the American regions. Taking into account the other control variables incorporated into estimationsit is suggested in this study that global and regional governments, as well as policymakers, could accelerate the achievement of institutional quality by strategically harnessing the potential of technology penetration.

Our research plays a crucial role in informing the strategic development of ICT policies aimed at promoting quality and inclusive institutions at both global and regional levels. It underscores the significance of incorporating ICTP as a critical factor in effectively achieving institutional quality. Further/future research should investigate whether the conclusions established in this study hold true in particular country-specific or other economic blocs settings and income groups of countries. This would contribute to a deeper understanding of the research topic and provide more relevant policy implications for specific countries, economic blocs, and income groups of countries.