How sectoral technological transformation explains firm-level productivity?

Zoran Aralica, Bruno Škrinjarić and Vitaliy Roud

Post-Communist Economies, 2025, vol. 37, issue 7, 869-890

Abstract: This study investigates the impact of sectoral technological transformation on firm-level productivity in Croatia from 2009 to 2019. Utilising a comprehensive dataset combining firm-level financial data from the Croatian Financial Agency and Eurostat’s Digital Economy and Society Statistics, we examine how adopting Information and Communication Technologies and digital technologies at the sector level affects individual firm productivity. We employ principal component analysis to construct indices capturing the adoption of ICT and digital technologies and then use multilevel panel data estimation techniques to analyse relationships. Our findings reveal that the ongoing technological transformation has a more significant impact on productivity in the services sector than manufacturing. We also observe that the joint effect of technology adoption and sector growth strongly correlates with productivity, suggesting that technological transformation could be a key driver of sectoral restructuring. Furthermore, we find that market concentration enhances productivity in industry but impedes it in services, indicating potential divergent competitive dynamics across sectors. These results contribute to understanding asymmetric sector evolution and highlight the need for adaptive, sector-specific policy approaches to foster productivity through the combined effects of digital technology adoption and sector growth.

Date: 2025
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DOI: 10.1080/14631377.2025.2497584

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