Digitalisation in Europe 2021-2022

Evidence from the EIB Investment Survey

European Investment Bank

• Publisher: European Investment Bank
• Year: 2022
• eBook ISBN: 9789286152320
• Topic: Business
• Subtopic: Business General
• Index: Business

The coronavirus crisis accelerated the digital transformation of Europe's economy. Before the pandemic, cutting-edge digital technologies were primarily used by the most innovative and modern firms. The COVID-19 crisis, however, brought the digital transformation to the larger society — and made digitalisation integral to firms' survival.Digital firms were better able to cope with the disruption unleashed by the pandemic, and they were less likely than non-digital firms to see sales decline significantly from 2020 onwards. Many of them used the crisis an opportunity to accelerate their digitalisation.The Digitalisation in Europe 2021-2022 report uses results from theEIB Investment Survey (EIBIS), conducted from April to July 2021, to shed light on the level of digitalisation among Europe's small and medium firms.

The role of digitalisation during COVID-19

Firms that have embraced digital technologies were better able to cope with the disruptions created by the pandemic. Firms’ adaptation strategies include remote working arrangements, smart factories, 3-D printing to produce in house product components or parts affected by supply chain disruptions, and the use of big data analytics and artificial intelligence to reschedule and plan activities to adapt to the COVID-19 crisis. The firms with the most advanced positions on the digital grid are less likely than non-digital firms to have experienced a decrease in sales since the beginning of 2020. This pattern is similar for firms on both sides of the Atlantic. They are also the least likely to consider that the crisis or its legacy pose an existential threat to their business. Furthermore, the crisis forced firms to find more efficient ways of working with digital technologies. Smaller businesses that improved their digitalisation as a reponse to the pandemic report more often that they used the crisis to accelerate changes they had already planned to make (38% of “basic” and 41% of “both,” compared to 18% of “neither” and 22% of “advanced”).

Impact of the COVID-19 crisis on the business

Firms that experienced a decrease in sales since the beginning of 2020 (in %)

Source: EIBIS (2021), firms in EU27.

Base: All firms that responded that sales decreased since the beginning of 2020.

The crisis or its legacy as an existential threat or an opportunity (% of SMEs)

Source: EIBIS 2021 add-on module — sample of EU SMEs in manufacturing and services (2021).

Larger firms are more likely to have invested to become more digital during the COVID-19 crisis. Comparing the probability of firms falling into the “neither” vs. “basic” categories can provide insight into which firms decided to start investing in digitalisation as a response to COVID-19. The estimates in Table 1 confirm once again that firm size matters. In particular, firms with more than 50 employees are much more likely to start investing in the digital transformation. Similarly, the probability of falling into the “both” category vs. remaining “advanced” highlights the firms that are likely to forge ahead during the pandemic among those that have already implemented digital technologies. Again, small firms belong to the problematic category. Even when they are already digitally active, they are significantly less likely to have increased their digital investments.

Fluctuations in sales during the crisis are also linked to whether a firm decided to start investing in digitalisation. Among firms that had not adopted advanced digital technologies (“neither” and “basic”), those that experienced an increase or decrease in sales from 2019 to 2020 were more likely to have subsequently invested in increased digitalisation than firms that reported no change in sales. Firms that were negatively affected by the COVID-19 crisis and experienced a drop in sales were more likely to have then invested than those not reporting a change, but to a lesser extent than firms that saw a positive impact. However, the impact of COVID-19 on sales was not associated with the continued digitalisation efforts of firms that had already implemented advanced digital technologies.

Probability of investing in digitalisation as a response to COVID-19

	Basic vs. neither	Both vs. advanced
Omitted category: micro
Small	0.069***	0.020
	(0.025)	(0.032)
Medium	0.173***	0.128***
	(0.031)	(0.032)
Large	0.179***	0.219***
	(0.044)	(0.034)
Omitted category: COVID-19 had no impact on sales
Increased sales or turnover	0.108**	0.003
	(0.044)	(0.041)
Decreased sales or turnover	0.080**	0.044
	(0.034)	(0.034)
Observations	5 560	6 135

Source: EIBIS (2021), firms in the EU27.

Note: Marginal effects in a probit model. The coefficients can be interpreted as marginal effects on the probability of being “basic” or “both.” *** p<0.01, ** p<0.05, * p<0.1. The regression also controls for country groups and sector.

The digital divide between firms may continue to grow over time. Looking ahead to the next three years, the top investment priorities for more digitally advanced firms are expanding capacity and developing new products, processes or services. For non-digital firms, on the other hand, replacing capacity (including existing buildings, machinery, equipment and IT) is more often mentioned as the investment priority. About 20% of non-digital firms report that they do not have any investment plans.

Investment priority over the next three years (in %)

Source: EIBIS (2021), firms in the EU27.

Furthermore, firms that have adopted advanced digital technologies are more optimistic a...

Table of contents

• Cover
• Title
• Table of Contents
• Overview
• Digitalisation in the European Union
• The EIB Corporate Digitalisation Index
• Role of the environment: digital infrastructure and digital skills
• Where does the European Union stand relative to the United States in digital adoption?
• The role of digitalisation during COVID-19
• Digitalisation, intangible investment, innovation and firm productivity
• Digitalisation, employment and management
• Digitalisation and climate change
• Policy recommendations
• References
• Austria (AT)
• Belgium (BE)
• Bulgaria (BG)
• Croatia (HR)
• Cyprus (CY)
• Czech Republic (CZ)
• Denmark (DK)
• Estonia (EE)
• Finland (FI)
• France (FR)
• Germany (DE)
• Greece (EL)
• Hungary (HU)
• Ireland (IE)
• Italy (IT)
• Latvia (LV)
• Lithuania (LT)
• Luxembourg (LU)
• Malta (MT)
• Netherlands (NL)
• Poland (PL)
• Portugal (PT)
• Romania (RO)
• Slovakia (SK)
• Slovenia (SI)
• Spain (ES)
• Sweden (SE)
• Appendix: The EIB Corporate Digitalisation Index
• Appendix: Comparing EIBIS to other data sources
• Copyright