Heterogeneous Economic Returns to Digitalization Across EU Economies: Evidence from Sectoral Panel Analysis
Volume 04 Issue 1
Authors
Dominika Gajdosikova, Iryna Vovk
Keywords
digital intensity, digital transformation, productivity, EU economies, cluster analysis
Citation in APA style
Gajdosikova, D. & Vovk, I. (2026). Heterogeneous Economic Returns to Digitalization Across EU Economies: Evidence from Sectoral Panel Analysis. Journal of Business Sectors, 4(1), 57–67. https://doi.org/10.62222/YEUZ4547
DOI
Abstract
Research background:
Digital transformation has become a key driver of productivity growth, innovation, and structural change in modern economies. Within the European Union (EU), the adoption of digital technologies is increasingly viewed as an important factor shaping competitiveness and long-term economic performance. However, empirical evidence on how digital intensity translates into sectoral economic outcomes across EU economies remains limited and often overlooks cross-country heterogeneity.
Purpose of the article:
The main aim of this paper is to examine the relationship between digital intensity and sectoral value added across EU economies and to determine whether the economic returns to digitalization vary across countries. The study also investigates whether EU economies can be grouped into distinct clusters according to their digital intensity and economic performance.
Methods:
The empirical analysis is based on sector-level panel data for selected economic sectors across EU member states covering the years 2022–2024, sourced primarily from Eurostat databases on digital intensity and sectoral economic performance. Digitalization is measured using the Digital Intensity Index (DII), which captures the extent to which enterprises adopt and integrate digital technologies. The relationship between digital intensity and sectoral value added is examined using fixed-effects panel regression models controlling for sector-, country-, and time-specific heterogeneity. A baseline specification estimates the average effect of digital intensity, while a heterogeneous country-slopes model captures potential differences in digital returns across national economies. To explore structural similarities among EU economies, hierarchical cluster analysis using Ward’s method and squared Euclidean distance is also applied.
Findings & Value added:
The findings offer implications for both policymakers and business practitioners. For policymakers, the results suggest that digitalization strategies should be tailored not only to country-specific conditions but also to sectoral characteristics, as the economic returns to digital technologies differ across industries. For firms and sectoral managers, the findings indicate that investments in digital technologies may yield larger productivity gains, particularly in sectors and countries where digital adoption is still evolving, underscoring the importance of aligning digital strategies with sector-specific operational and technological conditions.