This report analyses the peculiarities of innovation in Information and Communications Technologies (ICT), an ecosystem composed of various layers: from infrastructure to applications and content, and including end users. The report observes that innovation is becoming more open and collaborative in all layers, with various degrees of R&D intensity (greater at lower, physical layers); a prevalence of system goods with platforms and complementors mostly competing “for” rather than “in” the market; pervasive network effects coupled with relatively low entry barriers; short product life-cycles; and a high degree of co-evolution and co-dependency across and between layers. 
The nature of the ICT ecosystem determines a growing need for flexible, adaptive regulation, and the adoption of new policy instruments such as prizes and challenges. Policies should aim to create an environment favourable to the development of new, welfare-enhancing business models and avoid hindering the entrance of new playersJRC.B.6-Digital Econom