Impact of digitalization on industry: problems of definition in EU countries

Abstract

The digitalization of the economy as a whole, and of manufacturing in particular, is one of the top-priority tasks that governments, business and society face. Central in this process is the implementation of Industry 4.0, which leading and international organizations expect to become a driver of economic development. Therefore, the objective of the study is to define the impact of digitalization on pace of industrial development at the national level. EU member states have been selected as the subject of the study. Comparing countries within the EU's single economic space is the most consistent for several reasons. On the one hand, all of these countries operate under similar institutional conditions, and on the other – the single market facilitates the free movement of capital and labor to the utmost. Also, the vast majority of EU member states are members of the monetary union and use the single currency – euro. Correlation analysis has been chosen as the main method to study the conformity of industrial production dynamics with the processes of digitalization. The results of the study in the most generalized form prove the inconsistency between high levels of digitalization and high rates of industrial production. EU member states, the leaders in terms of digitalization, demonstrate lower rates of industrial production growth than those countries that have lower levels of digital development. The hypothesis on positive impact of high levels of digitalization on industrial production at the national level has not been confirmed. However, it is not advisable to consider the results of the study as a sufficient basis for the final refutation of this hypothesis. One possible explanation for the relatively slower pace of industrial production growth in countries with high levels of digitalization is the following. The high level of industrial development causes the high level of digitalization, but at the same time leads to the "trap of high level of production", when each successive percentage, having a high base of comparison, becomes increasingly difficult. A typical example is the comparison between the Netherlands and Romania. Romania ranks 28 th (last) in the average digitization rate across all EU countries and 1 st in terms of average industry volume growth. At the same time, the Netherlands ranks 28 th in terms of average growth of the industry volume index and 3 rd in terms of digitalization. Thus, it can be argued that at the moment, digitalization (digital capital) does not have a decisive influence on the relative (when comparing between countries) growth rates of industrial production.