Technology adoption of small and medium-sized enterprises and performance in European countries: A cross-country panel cointegration analysis

Abstract

Objective: The objective of the article is to explore the impact of the new technology adoption on the performance of small and medium-sized enterprises (SMEs) at the country level.

Research Design & Methods: The authors modelled the effect of technology adoption (TA) on SMEs’ market and sustainability performance by using the dynamic ordinary least squares regression technique. The analysis used a sample of 12 EU countries from 2008 to 2021. Regional specificities of the Baltic and Central European countries were introduced. We obtained a novel database from the European Union’s SME Performance Review indicators.

Findings: The results show that TA positively affects both market and sustainability performance in European SMEs at the country level. This impact is larger for market performance than for sustainability performance. Moreover, the long-run equilibrium relationships between TA and market performance demonstrate a positive effect in Central European countries and a negative effect in Baltic countries. Moreover, the impact of TA on sustainability performance proves negative for the joint group of new member countries consisting of Baltic and Central European states unlike for old member countries.

Implications & Recommendations: The findings suggest the adoption of a more strategic perspective among SMEs regarding TA. Furthermore, the study offers policy recommendations aimed at facilitating the green transformation of new member countries.

Contribution & Value Added: The effects of TA on market and sustainability performance have not yet been examined by applying an econometrically sophisticated analytical sequence on a panel dataset of countries’ SMEs. For policymakers, the findings demonstrate that environmentally friendly technologies, through enhancing sustainability performance, can be a solid pillar that undergirds a widespread green economic transition.

Keywords

technology adoption, market performance, sustainability performance, SMEs, cointegration

Author Biography

Viktória Endrődi-Kovács

PhD in Economics (2014, Corvinus University of Budapest, Hungary); Assistant Professor at the Corvinus University of Budapest (Hungary).

Betsabé Pérez Garrido

PhD in Mathematical Engineering (2012, Universidad Carlos III de Madrid, Spain); Associate Professor at the Corvinus University of Budapest (Hungary). 

Szabolcs Szilárd Sebrek

PhD in Business Administration and Quantitative Methods (2010, Universidad Carlos III de Madrid, Spain); Associate Professor at Corvinus University of Budapest (Hungary). 

References

1. Ahmed, W., Najmi, A., & Ikram, M. (2020). Steering firm performance through innovative capabilities: A contingency approach to innovation management. Technology in Society, 63, 101385. https://doi.org/10.1016/j.techsoc.2020.101385
2. Andrews, D.W.K. (1991). Heteroskedasticity and autocorrelation consistent covariance matrix estimation. Econometrica, 59(3), 817-858. https://doi.org/10.2307/2938229
3. Bernat, T., Gąsior, A., Lisowska, R., Szymańska, K., & Zaharia, R. (2023). Involvement’s barriers of micro and small firms into EU energy transition. Amfiteatru Economic, 25(63), 541-556. http://dx.doi.org/10.24818/ea/2023/63/541
4. Berrone, P., Fosfuri, A., Gelabert, L., & Gomez-Mejia, L.R. (2013). Necessity as the mother of ‘green’ inven-tions: institutional pressures and environmental innovations. Strategic Management Journal, 34(8), 891-909. https://doi.org/10.1002/smj.2041
5. Bhatia, M.S., & Kumar, S. (2023). An empirical analysis of critical factors of Industry 4.0: A contingency theory perspective. International Journal of Technology Management, 91(1-2), 82-106. https://doi.org/10.1504/ijtm.2023.10052651
6. Chege, S.M., Wang, D., & Suntu, S.L. (2020). Impact of information technology innovation on firm performance in Kenya, Information Technology for Development, 26(2), 316-345. https://doi.org/10.1080/02681102.2019.1573717
7. Chen, Y.-T., Sun, E.W., & Lin, Y.-B. (2020). Merging anomalous data usage in wireless mobile telecommunica-tions: business analytics with a strategy-focused data-driven approach for sustainability. European Jour-nal of Operational Research, 281(3), 687-705. https://doi.org/10.1016/j.ejor.2019.02.046
8. Cieślik, A., Michałek, J., & Szczygielski, K. (2016). Innovations and Export Performance: Firm-level Evidence from Poland. Entrepreneurial Business and Economics Review, 4(4), 11-28. https://doi.org/10.15678/EBER.2016.040402
9. Colombo, M.G., Piva, E., & Rossi-Lamastra, C. (2014). Open innovation and within-industry diversification in small and medium enterprises: The case of open source software firms. Research Policy, 43(5), 891-902. https://doi.org/10.1016/j.respol.2013.08.015
10. Croissant, Y., & Millo, G. (2019). Panel Data Econometrics with R. Hoboken, NJ: Wiley Online Library. https://doi.org/ 10.1002/9781119504641
11. Czerny, A., & Letmathe, P. (2017). Eco-efficiency: GHG reduction related environmental and economic per-formance. The case of the companies participating in the EU Emissions Trading Scheme, Business Strate-gy and the Environment, 26(6), 791-806. https://doi.org/10.1002/bse.1951
12. Dangelico, R.M., Pujari, D., & Pontrandolfo, P. (2017). Green product innovation in manufacturing firms: A sustainability-oriented dynamic capability perspective. Business Strategy and the Environment, 26(4), 490-506. https://doi.org/10.1002/bse.1932
13. De Pedraza Garcia, P., & Anastasis, K. (2022). Monitoring SMEs’ performance in Europe. EUR 31175 EN, Lux-embourg: Publications Office of the European Union. https://doi.org/10.2760/029214
14. Duc, N. le, & Lindeque, J. (2018). Proximity and multinational enterprise co-location in clusters: A multiple case study of Dutch science parks. Industry and Innovation, 25(3), 282-307. https://doi.org/10.1080/13662716.2017.1355230
15. Espoir, D.K., & Ngepah, N. (2021). Income distribution and total factor productivity: A cross-country panel cointegration analysis. International Economics and Economic Policy, 18, 661-698. https://doi.org/10.1007/s10368-021-00494-6
16. European Commission. (2003). Commission Recommendation of 6 May 2003 concerning the defini-tion of micro, small and medium-sized enterprises. Retrieved from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0361 on December 19, 2023.
17. European Commission. (2022). SMEs and Green markets Eurobarometer survey results. Retrieved from https://europa.eu/eurobarometer/surveys/browse/all/series/17833 on May 20, 2023.
18. European Commission. (2023). Flash Eurobarometer FL498 : SMEs, resource efficiency and green markets. Metadata quality. Retrieved from https://data.europa.eu/data/datasets/s2287_fl498_eng/quality?locale=en on December 19, 2023.
19. Eurostat. (2022a). Annual enterprise statistics by size class for special aggregates of activities. Retrieved from https://ec.europa.eu/eurostat/databrowser/product/view/SBS_SC_SCA_R2 on April 24, 2023.
20. Eurostat. (2022b). Community innovation survey microdata. Data online codes: inn_cis7-12. Retrieved from https://ec.europa.eu/eurostat/web/microdata/community-innovation-survey on May 20, 2023.
21. Eurostat. (2022c). Environmental protection expenditure by size class. Retrieved from https://ec.europa.eu/eurostat/databrowser/view/sbs_env_sc_r2/default/table on April 24, 2023.
22. Eurostat. (2023). Real GDP per capita. Retrieved from https://ec.europa.eu/eurostat/databrowser/view/sdg_08_10/default/table?lang=en on July 10, 2023.
23. Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclo-sure. Global Finance Journal, 38, 45-64. https://doi.org/10.1016/j.gfj.2017.03.001
24. Filippetti, A., & Guy, F. (2020). Labor market regulation, the diversity of knowledge and skill, and national innovation performance. Research Policy, 49(1), 103867. https://doi.org/10.1016/j.respol.2019.103867
25. Flammer, C., & Kacperczyk, A. (2016). The impact of stakeholder orientation on innovation: Evidence from a natural experiment. Management Science, 62(7), 1982-2001. https://doi.org/10.1287/mnsc.2015.2229
26. Fosfuri, A., Giarratana, M.S., & Luzzi, A. (2008). The penguin has entered the building: The commercialization of open source software products. Organization Science, 19(2), 292-305. https://doi.org/10.1287/orsc.1070.0321
27. Fuentelsaz, L., Gómez, J., & Palomas, S. (2009). The effects of new technologies on productivity: An intrafirm diffusion-based assessment. Research Policy, 38(7), 1172-1180. https://doi.org/10.1016/j.respol.2009.04.003
28. Gangwar, H., Mishra, R., & Kamble, S. (2023). Adoption of big data analytics practices for sustainability de-velopment in the e-commerce supply chain: A mixed-method study. International Journal of Quality & Reliability Management, 40(4), 965-989. https://doi.org/10.1108/ijqrm-07-2021-0224
29. Global Entrepreneurship Monitor. (2022). Interpreting NES data. Retrieved from http://gem-consortium.ns-client.xyz/about/wiki on August 18, 2023.
30. Greve, H.R., & Seidel, M.-D.L. (2014). The thin red line between success and failure: Path de-pendence in the diffusion of innovative production technologies. Strategic Management Journal, 36(4), 475-496. https://doi.org/10.1002/smj.2232
31. Guo, L., Ling, Qu, Y., & Tseng, M.-L. (2017). The interaction effects of environmental regulation and techno-logical innovation on regional green growth performance. Journal of Cleaner Production, 162, 894-902. https://doi.org/10.1016/j.jclepro.2017.05.210
32. Hossain, M.I., San, O.T., Ling, S.M., & Said, R.M. (2020). The role of environmental awareness and green technological usage to foster sustainable green practices in Bangladeshi manufacturing SMEs. Interna-tional Journal of Advanced Science and Technology, 29(7S), 3115-3124. https://doi.org/10.47836/pjssh.30.1.14
33. Im, K.S., Pesaran, M.H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econo-metrics, 115(1), 53-74. https://doi.org/10.1016/s0304-4076(03)00092-7
34. Jalil, M.H., Ali, A., & Kamarulzaman, R. (2022). Does innovation capability improve SME performance in Ma-laysia? The mediating effect of technology adoption. The International Journal of Entrepreneurship and Innovation, 23(4), 253-267. https://doi.org/10.1177/14657503211048967
35. Kao, C., & Chiang, M.-H. (2001). On the estimation and inference of a cointegrated regression in panel data. In B. Baltagi, T. Fomby & H. Carter (Eds.) Nonstationary panels, panel cointegration, and dynamic panels. Advances in Econometrics, (vol. 15, pp. 179-222). https://doi.org/10.1016/s0731-9053(00)15007-8
36. Khalilov, L., & Yi, C.-D. (2021). Institutions and entrepreneurship: Empirical evidence for OECD countries. Entrepreneurial Business and Economics Review, 9(2), 119-134. https://doi.org/10.15678/EBER.2021.090208
37. Kumar, A., & Ayedee, N. (2021). Technology adoption: A solution for SMEs to overcome problems during COVID-19, Forthcoming, Academy of Marketing Studies Journal, 25(1).
38. Levinthal, D.A., & March, J.G. (1993). The myopia of learning. Strategic Management Journal, 14(S2), 95-112, https://doi.org/10.1002/smj.4250141009
39. Li, W., Qiao, Y., Li, X., & Wang, Y. (2022). Energy consumption, pollution haven hypothesis, and Environmen-tal Kuznets Curve: Examining the environment-economy link in belt and road initiative countries. Ener-gy, 239, 122559. https://doi.org/10.1016/j.energy.2021.122559
40. Lippman, D. (2023). The ‘CEO of Anti-Woke Inc.’ has his eye on the presidency. Politico, February 13, 87680-87691.
41. Löfsten, H., & Lindelöf, P. (2005). R&D networks and product innovation patterns—academic and non-academic new technology-based firms on Science Parks. Technovation, 25(9), 1025-1037. https://doi.org/10.1016/j.technovation.2004.02.007
42. Maqsood, S., Zhou, Y., Lin, X., Huang, S., Jamil, I., & Shahzad, K. (2022). Critical success factors for adopting green supply chain management and clean innovation technology in the small and medium-sized en-terprises: A structural equation modelling approach. Frontiers in Psychology, 13, 1-16. https://doi.org/10.3389/fpsyg.2022.1008982
43. Marcon Nora, G.A., Alberton, A., & Ayala, D.H.F. (2023). Stakeholder theory and actor-network theory: The stakeholder engagement in energy transitions. Business Strategy and the Environment, 32(1), 673-685. https://doi.org/10.1002/bse.3168
44. Mendi, P. (2007). Trade in disembodied technology and total factor productivity in OECD countries. Research Policy, 36(1), 121-133. https://doi.org/10.1016/j.respol.2006.09.028
45. Muller, P., Ladher, P., Booth J., Mohamed, S., Gorgels, S., Priem M., Blagoeva, T., Martinelle, A., & Milanesi, G. (2022). Annual report on European SMEs 2021/2022 SMEs and environmental sustainability. Back-ground document, April 2022. Luxembourg: Publications Office of the European Union.
46. Mustafa, H.K., & Yaakub, S. (2018). Innovation and technology adoption challenges: Impact on SMEs compa-ny performance. International Journal of Accounting, Finance and Business, 3(15), 57-65.
47. Niehm, L.S., Tyner, K., Shelley, M.C., & Fitzgerald, M.A. (2010). Technology adoption in small family-owned businesses: Accessibility, perceived advantage, and information technology literacy. Journal of Family and Economic Issues, 31(4), 498-515. https://doi.org/10.1007/s10834-010-9197-0
48. Ocasio, W. (2011). Attention to attention, Organization Science, 22(5), 1286-1296. https://doi.org/10.1287/orsc.1100.0602
49. OECD (2022). Green Growth Indicators. Retrieved from https://stats.oecd.org/Index.aspx?DataSetCode=GREEN_GROWTH on April, 24 2023.
50. Octavia, A., Indrawijaya, S., Sriayudha, Y., Heriberta, M.E., Hasbullah, H., & Asrini, A. (2020). Impact on E-commerce adoption on entrepreneurial orientation and market orientation in business performance of SMEs. Asian Economic and Financial Review, 10(5), 516-525. https://doi.org/10.18488/journal.aefr.2020.105.516.525
51. Pappas, I.O., Mikalef, P., Giannakos, M.N., Krogstie, J., & Lekakos, G. (2018). Big data and business analytics ecosystems: Paving the way towards digital transformation and sustainable societies. Information Sys-tems and E-Business Management, 16(3), 479-491. https://doi.org/10.1007/s10257-018-0377-z
52. Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61(S1), 653-670. https://doi.org/10.1111/1468-0084.61.s1.14
53. Pesaran, M.H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22(2), 265-312. https://doi.org/10.1002/jae.951
54. Pesaran, M.H. (2015). Time series and panel data econometrics. Oxford: Oxford University Press.
55. Petrović, P., & Lobanov, M.M. (2022). Energy intensity and foreign direct investment nexus: Advanced panel data analysis. Applied Energy, 311, 118669. https://doi.org/10.1016/j.apenergy.2022.118669
56. Pinto, L. (2020). Green supply chain practices and company performance in Portuguese manufacturing sec-tor. Business Strategy and the Environment, 29(5), 1832-1849. https://doi.org/10.1002/bse.2471
57. Rosli, M.M., & Sidek, S. (2013). The Impact of innovation on the performance of small and medium manufac-turing enterprises: Evidence from Malaysia. Journal of Innovation Management in Small & Medium Enter-prises, 2013, 1-16. https://doi.org/10.5171/2013.885666
58. Saikkonen, P. (1991). Asymptotically efficient estimation of cointegration regressions. Econometric Theory, 7(1), 1-21. https://doi.org/1017/s0266466600004217
59. Salah, O.H., Yusof, Z.M., & Mohamed, H. (2021). The determinant factors for the adoption of CRM in the Palestinian SMEs: The moderating effect of firm size. PloS One, 16(3), e0243355. https://doi.org/10.1371/journal.pone.0243355
60. Sebrek, S.S. (2015). Managing organisations in Schumpeterian environments: Intra-industry diversification through strategic technology alliances and patents. Technology Analysis & Strategic Management, 27(2), 161-181. https://doi.org/10.1080/09537325.2014.954536
61. Sebrek, S.S. (2020). Overlap in external technology search locations and the breadth of IPR as-sets: Lessons from the Security Software Industry. Industry and Innovation, 27(1-2), 105-133. https://doi.org/10.1080/13662716.2019.1588710
62. Semenova, V., Sebrek, S.S., Garrido, B.P., Katona, A., & Michalkó, G. (2023). The interaction of actor-independent and actor-dependent factors in new venture formation: The case of blockchain-enabled entrepreneurial firms. Acta Oeconomica. Online first. https://doi.org/10.1556/032.2023.00001
63. Smallbone, D., Saridakis, G., & Abubakar, Y.A. (2022). Internationalisation as a stimulus for SME innovation in developing economies: Comparing SMEs in factor-driven and efficiency-driven economies. Journal of Business Research, 144, 1305-1319. https://doi.org/10.1016/j.jbusres.2022.01.045
64. Spithoven, A., Clarysse, B., & Knockaert, M. (2011). Building absorptive capacity to organise inbound open innovation in traditional industries. Technovation, 31(1), 10-21. https://doi.org/10.1016/j.technovation.2010.10.003
65. Srinivasan, R., & Swink, M. (2018). An investigation of visibility and flexibility as complements to supply chain analytics: An organizational information processing theory perspective. Production and Operations Management, 27(10), 1849-1867. https://doi.org/10.1111/poms.12746
66. Teece, D.J. (2007). Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enter-prise performance. Strategic Management Journal, 28(13), 1319-1350. https://doi.org/10.1002/smj.640
67. Torrent-Sellens, J., Díaz-Chao, Á., Miró-Pérez, A.-P., & Sainz, J. (2022). Towards the Tyrell corporation? Digiti-sation, firm-size and productivity divergence in Spain. Journal of Innovation & Knowledge, 7(2), 100185. https://doi.org/10.1016/j.jik.2022.100185
68. van de Vrande, V., de Jong, J.P.J., Vanhaverbeke, W. & de Rochemont, M. (2009). Open innovation in SMEs: trends, motives and management challenges. Technovation, 29(6-7), 423-437, https://doi.org/10.1016/j.technovation.2008.10.001
69. Wadood, F., Alsaikh, M., Akbar, F., & Mahmud, M. (2022). Adoption of open innovation and entrepreneurial orientation practices in Malaysian furniture industry. Entrepreneurial Business and Economics Review, 10(2), 21-40. https://doi.org/10.15678/EBER.2022.100202
70. Weaven, S., Quach, S., Thaichon, P., Frazer, L., Billot, K., & Grace, D. (2021). Surviving an economic downturn: dynamic capabilities of SMEs. Journal of Business Research, 128, 109-123, https://doi.org/ 10.1016/j.jbusres.2021.02.009
71. Xu, Z., Ge, Z., Wang, X., & Skare, M. (2021). Bibliometric analysis of technology adoption literature published from 1997 to 2020. Technological Forecasting and Social Change, 170, 120896. https://doi.org/10.1016/j.techfore.2021.120896
72. Yacob, P., Wong, L.S., & Khor S.C. (2019). An empirical investigation of green initiatives and environmental sustainability for manufacturing SMEs. Journal of Manufacturing Technology Management, 30(1), 2-25. https://doi.org/10.1108/jmtm-08-2017-0153
73. Ye, C., Song, X., & Liang, Y. (2022). Corporate sustainability performance, stock returns, and ESG indicators, fresh insights from EU member states. Environmental Science and Pollution Research, 29(58), 87680-87691. https://doi.org/10.1007/s11356-022-20789-8
74. Zamani, S.Z. (2022). Small and Medium Enterprises (SMEs) facing an evolving technological era: a systematic literature review on the adoption of technologies in SMEs. European Journal of Innovation Management, 25(6), 735-757. https://doi.org/10.1108/EJIM-07-2021-0360