Digital Transformation in European Union: North is leading, and South is lagging behind

Abstract

The transformation of the economy into a digital environment has become a necessary step in recent years. The consequences of the COVID pandemic have accelerated the digital transformation and the growth of the digital economy. Intensive business engagement in the digital economy requires innovative digital solutions and online means of promotion and sale. European Union (EU) countries need to create the conditions for the gradual transformation. The paper analyses business readiness for the digital economy in EU countries. It aims to compare and assess the current situation of digital readiness based on the set of selected indicators. The analysis includes a multidimensional comparison of EU countries, classification based on cluster analysis, and ranking based on factor analysis results. Results show significant differences among EU countries. Newer member countries, mostly from South-Eastern Europe, are still lagging behind the EU average in e-Commerce activities, usage of social networks, and cloud computing. Furthermore, factor analysis has been conducted to determine underlining factors describing the overall digital readiness of EU countries and rank them accordingly. As well as in the cluster analysis, factor analysis revealed that Nordic EU member countries perform very well and show the highest digital readiness.