On 28 and 29 November, the European Investment Bank and the European Central Bank, in cooperation with the Massachusetts Institute of Technology, Columbia University and SUERF (the European Monetary and Finance Forum) will co-organise a high-level conference on ‘Investment, Technological Transformation and Skills’.
EU firms represent 20% of global spending in R&D, but they feature less often among the top tech-firms in areas such as microelectronics, consumer electronics, digital infrastructure and services, and cybersecurity. In this post, we use a novel survey-based dataset to analyse the process of digitalisation for EU and US firms. We show that European firms lag in adopting digital technologies, particularly in the services sector and for the most advanced technologies. We highlight the fact that the adoption of digital technologies promises large boosts to productivity and disproportionate dividends in terms of competitiveness for early adopters, creating strong path dependencies, as first-mover advantages mean that the “winner takes it all”. The barriers to reverse the EU delay are deep-rooted and, thus, require decisive policy action.
Europe digitalisation lags the US
In our survey, we asked firms whether they have adopted one of four digital technologies 1 to date. Digital adoption rates in the EU service sector are below those in the US and European firms tend to lag particularly in adoption of the most sophisticated technologies, like big data, as well as the depth of integration. A much higher share of firms in the US have organised their entire business around digital technologies, which we label as “fully digital” (Figure 1). Given the markedly larger service sector in the US, this translates into lower adoption rates in Europe overall.