Abstract: The rapid expansion of digital technologies has transformed the foundations of
economic development, reshaping production systems, industrial structures, innovation processes,
and sustainability pathways. This study examines the mechanisms through which the digital economy
contributes to economic development and explores its implications for sustainable growth. Using a
qualitative conceptual research design based on an integrative literature review, the study synthesizes
insights from research on digitalization, innovation, productivity, industrial transformation, and
sustainable development. The findings indicate that the digital economy influences economic
development through four interrelated mechanisms: digital infrastructure development, innovation
enhancement, industrial upgrading, and resource allocation efficiency. Based on these findings, the
study proposes a Digital Economy Development Framework that explains how digital transformation
supports high-quality and sustainable economic development. The study contributes to the literature
by integrating fragmented research streams into a unified conceptual model and providing a broader
theoretical understanding of digital economy mechanisms.
Keywords: Digital Economy; Economic Development; Digital Transformation; Innovation;
Industrial Upgrading; Productivity; Sustainable Development.