By Désirée Rückert and Christoph Weiss
Based on The growing digital divide in Europe and the United States, EIB Working Paper 2020/07
The adoption of digital technologies in the business sector is spreading rapidly, from the provision of digital products and services online to robotised production processes, the internet of things (IoT), big data and artificial intelligence (AI), and applications, including the use of digital systems to manage back-office tasks.
Because of its transformative impact on the economy and the labour market, from both a creative and a destructive angle, digitalisation is being vigorously discussed by economists and policy makers. Numerous optimistic statements have been made that it will boost growth and productivity and trigger a fourth industrial revolution. However, there has been so far little hard evidence of a significant productivity boost. At the same time, many people fear that digitalisation can be a source of disruption, leading to a more polarised economic structure, with the benefits concentrated in a few “superstar” firms, while many firms and workers will be on the losing side
Growing digital polarisation in the global corporate landscape between the technology haves and have-nots also has implications for the rising polarisation of productivity. If European firms are unable to integrate new digital technologies into their business models, they will lose out, even in those sectors where they are currently still leading, such as the automotive sector. There is growing concern that EU firms in non-digital sectors lag behind in the adoption of digital technologies, especially in the services sector. This correlates with subdued EU productivity growth.
Even though these are first-order concerns, there is little large-scale firm-level evidence about digital technology adoption across EU countries and the US. Using a unique recent survey on the digitalisation activities of EU and US firms in the manufacturing and services sectors, we present new evidence for a growing digital technology divide.
Firms that are already digital are more likely to plan to increase investment in digital technologies.
Overall, around 60% of the firms have plans to step up investment in digital technologies in the coming three years. However, while only 47% of EU manufacturing firms that currently do not use digital technologies have plans to invest in digitalisation, more than 60% of digital firms intend to further increase their investment in digital technologies. In the services sector, the gap in digitalisation plans between non-digital firms and their digital competitors is even wider.