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Sectoral Digital Capabilities and Complementarities in Shaping Young Firms' Growth: Evidence from Europe

Bruno, Randolph; Korosteleva, Julia; Osaulenko, Kirill; Radosevic, Slavo; (2023) Sectoral Digital Capabilities and Complementarities in Shaping Young Firms' Growth: Evidence from Europe. Entrepreneurship and Regional Development 10.1080/08985626.2023.2218314. (In press). Green open access

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Abstract

We explore how digitalisation impacts young firms' growth. A longitudinal panel analysis of the EU's new ventures during 2010-2018 reveals that digital sectoral capabilities affect young firms' growth autonomously and via interaction with other sectoral capabilities. Digital sectoral capabilities play an important complementary role in facilitating the upscaling of young firms operating in R&D-intensive contexts as they mature and within environments rich in tangible capital investments. In business contexts characterised by high digital but low human capabilities, young firms struggle to grow, flagging a mismatch of skills' composition. The effects of digitalisation vary depending on the level of competition within each sector. The results on complementarities of sectoral capabilities suggest that horizontal policy solutions favouring specific capabilities in isolation may have limited or counterproductive effects. Instead, policy should target a portfolio of capabilities and consider their complementarities under competitive market structures. Our analysis shows that effective innovation policy should be broadly defined and closely integrated with competition policy.

Type: Article
Title: Sectoral Digital Capabilities and Complementarities in Shaping Young Firms' Growth: Evidence from Europe
Open access status: An open access version is available from UCL Discovery
DOI: 10.1080/08985626.2023.2218314
Publisher version: https://doi.org/10.1080/08985626.2023.2218314
Language: English
Additional information: © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.
Keywords: Turnover growth, young firms, resilience, digitalisation, sectoral capabilities, complementarities, market structure, innovation and competition policy, European Union
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/10170663
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