What is it about?
Severe skill shortages are forcing many companies to rethink how they operate. This study examines when and why small and medium-sized enterprises (SMEs) adopt digital technologies specifically to replace missing human workers. Analyzing survey microdata from over 14,000 firms across 35 European and non-European countries (Flash Eurobarometer 537) through a combination of logistic regression and machine learning (Random Forests), the paper identifies which firm characteristics and public support tools actually drive labor-substituting digitalization. Surprisingly, company size does not determine whether a firm replaces missing staff with technology; instead, older firms, members of industry clusters, and companies receiving public consulting, employee training, or direct grants are significantly more likely to automate tasks in response to labor deficits.
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Why is it important?
Challenges conventional wisdom on firm size: Shows that within SMEs, company age, experience, and membership in an industry cluster matter much more for labour-substituting digitalisation than employee headcount. Evaluates public support effectiveness: Demonstrates that non-financial aid (staff training and public consulting) and direct grants strongly drive digital substitution, whereas tax incentives and credit lines show no significant effect. Guides targeted industrial policy: Highlights major national and sectoral disparities (with construction lagging significantly) and shows why governments should prioritise advisory hubs and cluster building, especially for younger firms.
Read the Original
This page is a summary of: Characteristics of SMES Addressing Skill Shortages Through Adoption of Digital Technology, January 2025, Springer Science + Business Media,
DOI: 10.1007/978-3-031-98398-6_6.
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