Digital technology diffusion: A matter of capabilities, incentives or both?

This paper uses data on digital technology usage covering 25 industries in 24 European countries and Turkey over the 2010-16 period to explore the covariates of industry-level digital adoption by firms across two broad sets of technologies - cloud computing and back and front office integration. The focus is on factors that potentially affect firms' ca-pabilities and incentives to adopt - including the availability of enabling infrastructures (such as high-speed broadband internet), managerial quality and workers skills, as well as product, labour and financial market settings. Using a difference-in-difference approach we show that a number of these factors relate to technology adoption in economically sizeable ways. Diffusion of high-speed broadband internet correlates positively with adop-tion. Low managerial quality, lack of ICT skills and policies curbing market access, compe-tition in services, hiring and firing and availability of venture capital are associated with lower digital technology adoption. (c) 2020 Elsevier B.V. All rights reserved.