Digitalisation and economic performance in Azerbaijan’s new economy

SALIMLI HUSEYN ERKEN oqlu, Postgraduate Student

DOI: http://doi.org/10.35668/2520-6524-2026-1-03

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Keywords: new generation economy, digitalization, structural equation modelling, economic performance, Azerbaijan, SEM.

ABSTRACT

The article examines how digitalization affects economic performance in Azerbaijan within the frame- work of the new generation economy. Although digital transformation is increasingly treated as a decisive source of productivity growth, competitiveness, and structural modernization, its mechanisms remain insufficiently quan- tified in developing economies. The objective of the study is to identify and empirically measure the channels through which digitalization influences firm-level economic outcomes in Azerbaijan. The empirical base combines a structured survey of 450 enterprises, including 200 firms from the general sample and 250 small and medium- sized enterprises, with a composite indicator system labelled AZ-NGE-DI. The study applies structural equation modelling in two stages: first, the measurement model is validated for latent constructs describing digital infra- structure, human capital, policy and regulation, the level of digitalization, and economic outcomes; second, the structural model is estimated using maximum likelihood procedures in AMOS v.24. The results show that the level of digitalization has a strong positive and statistically significant effect on economic outcomes (gamma ≈ 0,50; p < 0,001). Digital infrastructure (beta ≈ 0,30) and human capital (beta ≈ 0,25) are identified as the strongest de- terminants of digitalization, while the direct effects of infrastructure, skills and policy variables on final economic outcomes are weak and statistically insignificant. This confirms the mediating role of digital transformation: infra- structure and competencies improve firm performance primarily through a higher level of digital adoption. The AZ-NGE-DI assessment additionally shows that Azerbaijan has reached a medium level of digital development, with relatively stronger readiness indicators than maturity and results indicators. The study contributes to the lit- erature by providing one of the first SEM-based empirical assessments of the economic effects of digitalization in Azerbaijan. Its practical value lies in the policy implications: the findings support prioritizing broadband and plat- form infrastructure, advanced digital skills, SME support mechanisms, and a more coherent innovation ecosystem in order to narrow the gap between digital readiness and measurable economic returns.

Надійшла до редакції 02.03.2026

Прийнята до друку 12.03.2026

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