From digital investment to economic performance: insights from EU25 economies

PurposeThe purpose of this study is to examine the impact of digitization on selected productivity and efficiency indicators in EU25 countries. This research focuses on the relationship between digitization, labor productivity and capital efficiency, aiming to provide insights into how digital adoption influences economic performance.Design/methodology/approachThis study uses a panel data regression analysis using data from Eurostat for the period 2017–2020. Two econometric models are developed: the first assesses the effect of digitization on nominal unit labor costs based on hours worked, while the second evaluates its impact on gross value added per unit of net fixed assets. The analysis applies fixed effects and random effects models to estimate the significance of digitization proxies.FindingsThe results of this study indicate that the provision of portable digital devices to employees has a positive effect on capital productivity while reducing labor costs. However, a higher share of enterprises providing internet access to employees negatively impacts gross value added per unit of net fixed assets, suggesting that digital infrastructure alone is insufficient without complementary digital skills.Research limitations/implicationsLimitations include data availability constraints for advanced digital technologies such as artificial intelligence and the Internet of Things. Future research should incorporate firm-level data to refine the analysis.Practical implicationsThe findings of this study highlight the need for policy interventions to support digital literacy and infrastructure integration to maximize the benefits of digitization on productivity.Originality/valueThis study contributes to the literature by providing a cross-country comparison of digitization’s effects on productivity and efficiency indicators within the EU25 framework, closing existing research gaps with robust panel data analysis.