Development of Competitive Advantages by Small and Medium-Sized Enterprises Based on Digital Innovations: Experience of Germany and Finland

Abstract

During the fourth industrial revolution, companies that effectively use digital innovations are more competitive than other businesses. Thanks to digital technologies, companies can communicate more productively with their customers, analyze data about them, and create more accurate and customized solutions. This gives companies a competitive advantage in the markets. Digital transformation of small and medium-sized businesses has certain distinctive features, benefits, and risks. European companies have extensive experience in implementing digital innovations, therefore, studying and summarizing their results is an important scientific and practical task in the context of the general issue of digitalization of Ukrainian business. The article aims at studying the experience of small and medium-sized enterprises (SMEs) in Germany and Finland in creating competitive advantages based on digital innovations in the market environment. According to the results of the research, it was found that along with large industrial enterprises in Germany, digital innovations are actively implemented by German SMEs, the so-called Mittelstand, representing more than 99% of private companies in the country. A large number of German SMEs were founded or grew through innovation. The analysis of the digitalization trends of German SMEs has led to the conclusion that the most promising and growing innovative technologies are Big data, Blockchain, Cloud computing, Quantum Computing, Digitalization of education, Artificial intelligence, Microelectronics, and e-Invoices. The practice of active spreading of innovations in small and medium-sized businesses can also be observed in Finland. An important prerequisite for the successful development of digital technologies is the Finnish startup ecosystem. Due to the introduction of favorable conditions for startups (simplification of bureaucratic procedures, transparency and accessibility of investments for foreign investors, etc.), the quantity and value of Finnish startups are growing annually. The article concludes that although the existing individual SMEs in certain sectors of the economy can innovate to survive in a highly competitive environment, the mass development of innovative SMEs is impossible without a favorable investment and business climate, an effective innovation infrastructure, and other forms of support. The generalized experience of foreign SMEs and startups can be used by Ukrainian entrepreneurs for further digital transformation in the post-war period.