Using new evidence on the digitalisation activities of firms in the European Union and the
United States, we document a trend towards digital polarisation based on firms’ use of the
latest digital technologies and their plans for future investment in digitalisation. A substantial
share of firms are not implementing any state-of-the-art digital technologies and do not
have plans to invest in digitalisation. However, there is also a substantial share of firms that
are already partially or even fully implementing state-of-the-art digital technologies in their
businesses and that plan to further increase their digitalisation investments.
Small Manufacturing firms and old small firms in services are significantly more
likely to be and remain non-active in terms of digitalisation. Our results do not provide
any evidence that EU firms are more likely than their US counterparts to be stuck on the
wrong side of the digitalisation divide. Taking into account firm size and firm age, there
are no significant differences between the EU and the US in terms of having more or fewer
persistently non-digital firms.
As persistently digitally-inactive firms are also less likely to be innovative, to add
employees or to command higher mark-ups, it is important for policymaking to remove
barriers that trap these firms in persistent digital inactivity. Lack of access to finance is a
major barrier for EU firms compared to their US counterparts, particularly for the EU’s
persistently non-digital firms, and especially for older, smaller companies in services.
Improving their access to finance might therefore go a long way towards addressing the
corporate digitalisation divide in the EU
