Transnational governance of digital transformation: financing innovation in Europe’s periphery

Abstract

ABSTRACT Policymakers in Europe have embraced the notion that they can and should drive economic growth by promoting digital technology. Efforts to do so, known as ‘digital transformation’, involve reallocating labour and capital to more efficient uses, especially those that produce technological innovation. Recent research has shed light on the politics of updating institutions for education and skills training, but we know little about the politics of reallocating capital in the current episode of economic upgrading, despite the specific and sizable costs of producing technological innovation. What strategies are policymakers implementing to finance technological innovation, especially in Europe’s periphery, where states lack fiscal resources? Focusing on the case of Portugal, this article illustrates the centrality of development financial institutions to financing technological innovation, identifying a distinct type of digital transformation in Europe’s periphery, where the state plays a marginal role in governing key aspects of economic upgrading. Instead, private finance allocates capital, and international organisations like the European Commission design policies to govern capital allocation. This article develops a framework for analysing the politics of digital transformation in Europe’s periphery that centres transnational actors and institutions, rather than the state, in directing the path of technological and structural change.