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The growing digital divide in Europe and the United States

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  • Désirée Rückert
  • Reinhilde Veugelers
  • Christoph Weiss

Abstract

Using a new survey on digitalisation activities of firms in the EU and the US, we identify digitalisation profiles based on the current use of digital technologies and future investment plans in digitalisation. Our analysis confirms the trend toward digital polarisation and a growing digital divide in the corporate landscape with, on one side, many firms that are not digitally active, and on the other side, a substantial number of digitally active firms forging ahead. Old small firms, with less than 50 employees and more than 10 years old, are significantly more likely to be persistently digitally non-active. We show that these persistently non-digital firms are less likely to be innovative, increase employment or command higher mark-ups. These trends are likely to exacerbate the digital divide across firms in the EU and the US.

Suggested Citation

  • Désirée Rückert & Reinhilde Veugelers & Christoph Weiss, 2020. "The growing digital divide in Europe and the United States," Working Papers of Department of Management, Strategy and Innovation, Leuven 654659, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    • Handle: RePEc:ete:msiper:654659
    Note: paper number MSI_2007
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    References listed on IDEAS

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    1. Jan De Loecker & Jan Eeckhout & Gabriel Unger, 2020. "The Rise of Market Power and the Macroeconomic Implications [“Econometric Tools for Analyzing Market Outcomes”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 561-644.
    2. Dan Andrews & Chiara Criscuolo & Peter N. Gal, 2016. "The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy," OECD Productivity Working Papers 5, OECD Publishing.
    3. David Autor & David Dorn & Lawrence F Katz & Christina Patterson & John Van Reenen, 2020. "The Fall of the Labor Share and the Rise of Superstar Firms [“Automation and New Tasks: How Technology Displaces and Reinstates Labor”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 645-709.
    4. Reinhilde Veugelers & Annalisa Ferrando & Senad Lekpek & Christoph T. Weiss, 2019. "Young SMEs as a Motor of Europe’s Innovation Machine," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(6), pages 369-377, November.
    5. Mr. Federico J Diez & Mr. Daniel Leigh & Suchanan Tambunlertchai, 2018. "Global Market Power and its Macroeconomic Implications," IMF Working Papers 2018/137, International Monetary Fund.
    6. Sara Calligaris & Chiara Criscuolo & Luca Marcolin, 2018. "Mark-ups in the digital era," OECD Science, Technology and Industry Working Papers 2018/10, OECD Publishing.
    7. Reinhilde Veugelers, 2018. "Are European firms falling behind in the global corporate research race?," Policy Contributions 25100, Bruegel.
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    Cited by:

    1. Björn Döhring & Atanas Hristov & Christoph Maier & Werner Roeger & Anna Thum-Thysen, 2021. "COVID-19 acceleration in digitalisation, aggregate productivity growth and the functional income distribution," International Economics and Economic Policy, Springer, vol. 18(3), pages 571-604, July.

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    More about this item

    Keywords

    digital technology; investment; firm performance;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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