An investigation of digital integration's importance on smart and sustainable agriculture in the European region

Abstract

This paper develops a theoretical framework to provide a comprehensive analysis of the link between the digital transformation process in the business and public sectors and the sustainability of the agriculture sector. Sustainability can be analyzed through four dimensions: the economic issue captured by productivity growth and export value growth, the social issue captured by employment growth, and the environmental issue captured by the sustainable nitrogen management index. Digital businesses are captured by four elements of e-Commerce (e-Commerce sales, e-Commerce web sales, e-Commerce turnover, and online selling) and two estimations of e-Business (Cloud usage and customer relation management (CRM) usage). Digital public services are reflected by user-centricity, business mobility, and key enablers. It is the first to prove the existence of a nonlinear relationship between digitalization and sustainable agriculture. We apply various econometric techniques, including the panel-corrected standard errors (PCSE) model, feasible generalized least squares (FGLS) estimation, and two-step generalized method of moment (two-step GMM) model, to a database of 24 countries in the European Union between 2011 and 2019. The results point to the importance of digitalization in improving the agriculture sector's productivity, export activities, employment, and environmental sustainability. However, these impacts of digitalization on each dimension of the agriculture sector's sustainability are nonlinear in the shape of a U-curve, suggesting that the favorable effects only appear when the development of digitalization reaches a certain threshold. Our findings suggest critical policy implications for the promotion of digitalization as a tool to pursue smart and sustainable agriculture. It is crucial for policymakers to control the digitalization process and intervene, as digitalization, as much as it is innovative, can be detrimental to ethical, political, social, or cultural values.