Digitisation: German SMEs Unperturbed by Competitive Pressure from Internet Companies

Between 2013 and 2015, four out of five small and medium-sized enterprises (SMEs) in Germany carried out projects aimed at increasing their level of digitisation. Digitisation is certainly not a new concept for SMEs. The majority of businesses, however, spent less than 10,000 euros per year on digitisation projects during this period. Businesses with an advanced level of digitisation invest more frequently in both technological projects and competencies related to digitisation than other firms. Only a small number of businesses are concerned about the risk of additional competitive pressure from start-ups or internet companies. These are the findings of a recent study conducted by the Centre for European Economic Research (ZEW), Mannheim, in collaboration with the infas Institute for Applied Social Sciences and the KfW Group.

As part of the study, ZEW surveyed approximately 2,100 SMEs with at least five employees and a turnover of a maximum of 500 million euros in the manufacturing industry and selected service sectors. Digitisation projects include all projects undertaken with the aim of expanding digitisation and the respective competencies set within businesses. Not included are routine and replacement investments in information and communication technologies (ICT). Technological projects consist in introducing new technologies such as the implementation of more efficient hardware and software or the relaunch of a company's website. Competencies projects include activities such as further training programmes and IT consulting.

Expensive investments in digitisation are still rare

Nearly all enterprises with 50 or more employees have implemented digitisation projects in the past three years. Approximately 80 per cent of smaller businesses have implemented such projects. Although expenditure for these projects is low among the majority of SMEs, five percent of them spend 100,000 euros or more per year on digitisation projects. 93 per cent of enterprises with an advanced level of digitisation have implemented technological projects and 84 per cent have implemented competencies projects. Amongst the companies lagging behind in terms of digitisation, 70 per cent carried out technological projects and merely 45 per cent conducted competencies projects. According to the majority of the surveyed firms, the lack of ICT skills is the key factor impeding the digitisation process.

Approximately half of the companies consider it likely that they will have to respond more flexibly to customer's wishes as a result of digitisation. Around one third of the companies expect pressure on prices to increase. In contrast, only six per cent of enterprises consider it very likely, and eleven per cent likely, that they will face competition from start-ups or internet companies operating in different markets.

"Enterprises expect the competition arising as a result of digitisation to manifest itself in terms of the more traditional dimensions of competition, such as price and service quality. Most of the companies are not concerned that they might lose their market to an internet company," explains Dr. Marianne Saam, Senior Researcher at the ZEW Research Department "Information and Communication Technologies" and project leader of the study.

For more information please contact

PD Dr. Marianne Saam, Phone +49(0)621/1235-285, E-mail saam@zew.de