Digital technology adoption and firm performance: Evidence from Finland ’s service sector using linked microdata

Abstract

This study examines how digital technology adoption relates to firm performance in Finland’s private service sector, an ideal case given both the country’s advanced digitalization and the sector’s central role in the economy. Using the Eurostat Digital Intensity Index, which captures the adoption of 12 technologies, we measure firms’ digital maturity and link it to firm performance outcomes. The analysis draws on a unique linked employer–employee dataset spanning 2015–2021, combining firm-level financial, workforce, and ICT usage information. Results show that higher digital intensity is positively associated with firm characteristics such as size, international activity, market share, foreign ownership, labor productivity, and workforce education. It is also linked to stronger performance outcomes, including revenue, value added, and labor productivity. Notably, these performance links are strongest among top-performing firms, suggesting that the associations with digitalization are unevenly distributed across the performance spectrum. This heterogeneity highlights the risk of a ‘digital divide’ and points to the importance of policies that enable broader diffusion of digital capabilities beyond frontier firms.