Digitalization and Productivity: Evidence from EU Manufacturing Sector

Manufacturing sector productivity is one of main driver for economy grow in Europe. In the context of manufacturing sector digitalization, importance of influencing factors for productivity increase plays a key role. This paper aims to evaluate digitalization impact on EU manufacturing sector productivity, considering variables as relative size measures for the period of 2012-2020. There are strong believe that digitalization is an engine of innovation and competitiveness in manufacturing sector. Changing processes and integration of digital technologies leads manufacturing sector towards productivity increase. We perform OLS regression on sample of 5013 records covering 27 EU countries and 642 manufacturing firms over the years 2012-2020. Analysis consists of such factors as operating revenue, number of employees per company, tangible fixed assets, intangible fixed assets, profit and loss, investment to digitalization. We study ratio of digital investment to total assets as dependent variable to understand how investment decision of company can be evaluated with independent variables, identified in literature review. We build 3 models for regression analysis. Highest value of R-Square calculated for operating revenue as dependent variable is 0.299 and significance level is sufficient. Our results indicate that R-Square is 0.366 for relationship between digital investment and independent variables in analysis. Moreover, intangible assets impact is not significant considering digital investment outlay, which contradict believe stated in literature for direct intangible impact on digitalization. The main variable is number of employees per company with identified significant negative route.