The impact of digitalization on SMEs GDP contribution

Abstract

This research investigates the impact of digitalization on contribution to Gross Domestic Product, in the context of the Hungarian National Infocommunication Strategy adopting the European Union’s Digital Agenda. 1045 small and medium enterprises were included in the research, using data from years of 2010 and 2018. The level of digitalization was measured by the Digital Economy and Society Index, using both information technology infrastructure-related information, as well as the use of enterprise software applications, particularly Enterprise Resource Planning or Customer Relationship Management systems. The contribution to Gross Domestic Product was measured by headcount, pay costs and turnover as proxies using the financial data submissions of the companies. The results of the partial least squares structural equation modelling suggest that while the firm’s current financial position is being the most important factor for its future contribution to Gross Domestic Product, digitalization, especially the adoption of enterprise software systems is also a significant factor to the firm’s contribution. Therefore, it is worth pursuing digitalisation for driving economic development. The proposed method could be applied to other Member States, creating the opportunity to understand similarities and differences of their economies.