The Determinants and Effects of Competitiveness: The Role of Digitalization in the European Economies

Tatyana Boikova,Sandija Zeverte-Rivza,Peteris Rivza,Baiba Rivza

doi:10.3390/su132111689

Tatyana Boikova, Sandija Zeverte-Rivza + Show 2 more

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https://doi.org/10.3390/su132111689

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Abstract

Improving national competitiveness is fundamental to raising long-term economic growth rates and enhancing living standards. The determinants of competitiveness change along with macroeconomic factors, business environment and consumer demand. These changes are visible in the growing importance of digitalization of enterprises of all sectors that has become a critical factor for competitiveness in recent years and will likely become even more essential. The main determinants of competitiveness performance in the European Union (EU) were analyzed in the proposed research. The study included a holistic approach to competitiveness and economic growth and aimed to reveal the factors that determine and contribute to the growth of European economies, as well as to identify clusters of the EU countries. The criteria of competitiveness that are significant for estimation of competitiveness factors and their relationship with economic growth were revealed by using factor analysis. The results indicate that the most significant factors are F1 Macroeconomic Stability, F2 Research and Development (R&D) and Digitalization, F3 Foreign Direct Investment and F4 Trade Openness. By applying cluster analysis, the EU countries were grouped into five clusters on the basis of the contribution of competitiveness factors to economic growth.

Highlights

Published: 22 October 2021High competitive performance remains the main precondition of the national economies in increasing GDP per capita and well-being, i.e., better conditions for health, social protection and living standards
Other factors change slightly during the years under study, and the hypothesis is approved— the most significant determinants of the competitiveness of European economies are linked with macroeconomic factors, Research and Development (R&D) and digitalization, and they are relatively stable during the analyzed time frame
We revealed that the significant competitiveness gap among the European Union (EU) countries existed mainly in such pillars of the Global Competitiveness Index as the product market, labor market, financial system, business dynamism and innovation capability, as well as in competitiveness factors ranking as economic performance, government efficiency, business efficiency, infrastructure and digitalization

Summary

Introduction

Published: 22 October 2021High competitive performance remains the main precondition of the national economies in increasing GDP per capita and well-being, i.e., better conditions for health, social protection and living standards. Strong international competition fostering effective economic development should not turn into a destructive force, especially for a holistic model of long-term inclusive, environmentally sustainable and knowledge-driven growth. It is worth noting that sustained, inclusive and sustainable economic growth is one of the Sustainable Development Goals to be achieved by 2030 according to the 2030 Agenda for Sustainable Development of the United Nations [1]. The factors that determine competitiveness and the competitiveness itself have been studied thoroughly. The concept of competitiveness is constantly evolving along with the driving forces or determinants of competitiveness. Competitiveness is determined and can be assessed by many factors and their combinations; the Institute

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