ANALYZING THE EFFICIENCY OF DIGITALIZATION IN SMALL AND MEDIUM-SIZED ENTERPRISES ACROSS EU COUNTRIES USING DEA MODELS

Abstract

The process of digitizing businesses involves ongoing investments and additional costs, leading to the inevitable inquiry into the economic impact of digital transformation. Specifically, it's important to evaluate how this process contributes to the economic growth of nations. The article introduces a method for creating a ranking of European countries according to the economic benefits derived from digitalizing businesses of different scales. To achieve this, DEA models were developed to measure the effectiveness of digital adoption by small and medium-sized enterprises and larger corporations. For input variables, we selected metrics that reflect the extent of business digitalization, specifically, the proportion of SMEs (small and medium-sized enterprises) with a high digital intensity index (DII), the percentage of SMEs utilizing cloud technologies, and the contribution of SME turnover to the overall e-commerce turnover. The output variables chosen were metrics indicative of a country's economic health: GDP per capita, the ratio of exports to GDP, and the international investment position. The evidence demonstrates that due to significant differences in size, economic advancement, and digitalization levels among EU countries, the VRS model more adeptly accommodates these disparities. This approach permits the evaluation of each country's performance based on its unique situation and potential for development, without consideration of its economic magnitude. In 2022, Denmark, the Netherlands, Sweden, Finland, Malta, and Belgium emerged as the frontrunners in digital intensity among SMEs, with nearly 40% of businesses exhibiting a high degree of digital engagement. Among these leaders, only Malta and the Netherlands achieved the highest efficiency in leveraging digitalization for economic growth, as determined by the VRS model that considers variable returns to scale. It was shown, that the economic effect of digital transformation on large enterprises in EU countries is more substantial than on small and medium-sized enterprises.

Keywords

• digitalization
• SME
• EU countries
• digital intensity index
• DEA model
• VRS