Digital transformation, ESG, and companies' performance: an exploratory study of the European food sector

Digital transformation is helping to increase the competitiveness of all types of industries. The food sector provides an interesting area of analysis, given the dynamic changes across Europe in recent decades. As a result, innovation can directly lead to increased material well-being. This study investigates how the managerial and technical capabilities of companies related to digital transformation affect firm performance in this specific sector and region. Applying Principal Components Analysis (PCA) to a set of unique survey data, we construct multivariate indices that capture Managerial Capability, Digital Orientation, Digital Capabilities, and Firm Performance. Bivariate analysis shows positive relationships between this latter index and each of the three others, suggesting that increases in digital transformation improve firm performance. Importantly, we find that companies that file annual reports related to Environmental, Social, and Governance (ESG) have better firm performance on average. This suggests that firms should invest in this type of innovation, particularly that which meets ESG goals.