Digital Production Investments and Financial Outcomes: A Baltic and Rest of Europe Comparison

Abstract

This study provides new evidence on how production digitalization investment affects firm financial performance across diverse European regions. A panel of 14,935 firm-year observations from 30 countries (2012–2022), including a focused Baltic subsample, is used alongside a refined digital capital intensity metric based on depreciated plant and machinery value. The results indicate a positive association between digital investment and operating revenue across Europe, with significantly stronger effects observed in the Baltic region. Interaction models reveal higher marginal returns for Baltic firms, suggesting that digital capital delivers amplified value in economies with lower digital saturation but greater absorptive urgency. Employee-related costs consistently predict revenue outcomes, underscoring their role in translating digital assets into performance. Intangible fixed assets exhibit a positive impact in Baltic labor-scale models but weaker effects elsewhere, indicating that institutional maturity mediates knowledge capital productivity. Implications: (1) digital investment yields asymmetric returns; (2) workforce investment enhances digital ROI; and (3) policy should prioritize organizational readiness alongside infrastructure. This study contributes by introducing a replicable proxy for production-level digitalization and by providing rare comparative evidence on digital returns in transitional versus mature European economies.