Spatial Patterns and Drivers of SME Digitalisation

ABSTRACT: Digital transformation plays an increasingly important role in the growth and competitiveness of small and medium-sized enterprises (SMEs), yet little is known regarding spatial inequalities in their adoption of advanced digital technologies. Using recent data from the Flash Eurobarometer 486, we study the spatial patterns of drivers for the implementation of new digital technologies in SMEs in Europe. In our analysis, the focus is on the possible influence of location. Considerable heterogeneity of SMEs is found in their propensity to adopt advanced digital technologies related to the strength of the local business environment and to the urban/rural hierarchy. PLAIN ENGLISH SUMMARY: EUROPEAN SMES AND DIGITALISATION: The adoption of digital technologies favours the competitiveness, resilience, and internationalisation of firms, but SMEs, which form the backbone of the EU economy, are lagging behind. A recent survey reveals that location greatly influences the probability that European SMEs adopt digital technology. Rural and small-town SMEs are less likely to be adopters, even when country, sector, and firm-specific characteristics are taken into account. However, good business environments always encourage the adoption of digitalisation technologies, whatever the geographic location of an SME. Innovators tend to be adopters, especially when they employ green innovation or management innovation. Larger SMEs, companies that are part of a business group, grow more rapidly, and/or export, are all more likely to adopt digital technologies. Policy-makers need to contemplate the urban/rural-divide and promote strong business environments in all types of locations. Public encouragement towards innovation is likely to indirectly promote easier access to digital technologies.