Digitalisation, Innovation, and Performance of SMEs in Central and Eastern Europe: A Spatial and Distributional Analysis

This research aims to highlight the role of digitalisation and innovation at the level of Small and Medium-sized Enterprises (SMEs) in shaping the business environment and enhancing the economic performance of companies in Central and Eastern Europe (CEE). The methodology is based on two modern econometric modelling techniques, namely spatial analysis, implemented through spatial regression methods founded on Spatial Error Models (SEM), and Quantile-on-Quantile Regression Models (QoQRM) using the bootstrap method, which is employed for the analysis of the conditional distribution of variables. This approach allows the assessment of the impact of digitalisation and innovation within SMEs on firm performance across the entire conditional distribution of results. These models are used at the level of a complex database that includes a set of specific indicators compiled for ten different CEE countries for the 2017-2024 time span. The results show that the economic performance of SMEs in CEE depends on targeted and adapted digitalisation and technological innovation strategies that match the companies capacities, efficient financing and collaboration mechanisms, as well as the alignment of product and process innovation with economic resources and market orientation. This study is an original contribution that highlights the diverse and conditional effects of digitalisation and innovation on SMEs in CEE countries, demonstrating that their impact on investment, turnover, and employment is not uniform, but depends on the initial level of performance and the structural context of the examined economies. This emphasises the need for tailored policies aimed at strengthening the specific capacities of enterprises and reducing regional disparities.